With the gold price pretty much on the floor where is all the appetite coming from Notwithstanding the fact that the FTSE has lost almost 10% or £50 billion (in terms of liquidity) in the last six weeks the immediate reaction has prompted the market to buy physical gold as a means of protection.
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According to the Chinese, the rest of the world have been slow on the uptake and are 6 weeks behind the curve. China has always been 10 steps ahead with regards to ensuring risk is minimised and protection is maximised and have been quietly soaking up the world’s gold supply as they see Gold’s Perfect Storm approaching. The trend is even more astonishing given that it’s not just the Central bank buying it’s also the Chinese population who are taking control into their own hands and securing their own wealth.
Chinese demand for gold sits comfortably at 1,132 tonnes a year and this figure is quickly escalating with a target of 1,350 by 2017. It’s safe to say that the Chinese have cemented its place as the world’s largest gold market.
According to the World Gold Council China will see sustained growth over the next four years and with prices 42% cheaper than they were 2 years ago, demand from china within the international gold market is accelerating. Despite the fact that “investment grade gold” consists of physical gold of at least 22ct, the Chinese tend to prefer 24ct gold. With this in mind The Royal Mint has attempted to capture this growing market by introducing, for the first time, a 24ct Britannia Coin during 2013 in an effort to appeal to this ever hungry Chinese demographic.
The Royal Mint has furthered its efforts by introducing The Lunar Coin where various animals relevant to the Chinese year are illustrated on the face of the coin. This year we’ve seen The Mint’s popular 24ct Lunar Year of the Horse being snapped up with of course the best prices on our Featured Products page with a 5% discount to our normal retail price. The Royal Mint have followed this coin up by recently launching the Year of the Sheep Lunar coin in order to spark even further interest within this community. The real beauty of this coin is that because it’s a British coin it has the status of Tax Free Gold Coins and is exempt from Capital Gains Tax; a double whammy if you’re a Chinese person living in the UK!
While the Mint’s new online shop and storage facility is a welcome, if expensive, addition to the UK’s gold distribution network, I don’t think I’m being too cynical that it also provides a perfect portal for Chinese collectors of British coins too.
It will be interesting to see how their offerings evolve over the next few years if the lucrative Chinese market continues to thrive.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.