Piggybacking new year, gold to glitter

Gold as an investment asset will likely glitter brightly in China this year, but its consumption in the form of jewelry may drop, said experts.

According to a report released by the World Gold Council, China remained the world's largest investment market for gold bars and coins last year.

Wang Lixin, managing director of the WGC, attributed gold's continuing allure as an investment-worthy asset to uncertainty-riddled business environment, the weakening of renminbi and the complicated stock market.

The report showed demand for gold bars and coins in China stayed robust at 304 metric tons last year.

The People's Bank of China also announced it added roughly 10 tons to its gold reserves in December, the first time since 2016 that it made such a move.

"Physical gold investment demand, demand for gold jewelry, and an increase in gold reserves by the PBOC were the three highlights of the Chinese gold market in 2018," Wang said. "This re-emphasizes gold's unique role as a risk hedge within investment portfolios."

Song Xin, chairman of the China Gold Association, said there has been an uptrend in gold demand for investment purposes to avoid risks elsewhere.

"More and more investors and individuals prefer to hold gold, leading to the dramatic increase in demand for gold bars."

Wang said the complicated business environment may continue to worry consumers and weaken their intent to buy gold for pure consumption in the future.

WGC data showed a 3-percent year-on-year drop in China's consumption of gold jewelry in the fourth quarter of 2018. The WGC attributed the drop to a sudden increase in gold prices last October and slowing economic growth.

Also, gold consumption may have fallen as a growing number of consumers prefer to travel instead of shopping during weeklong breaks such as the National Day holiday and the Spring Festival holiday.

But, overall, the Chinese gold market has remained in the positive zone in the past year as the annual demand grew by 3 percent, thanks to policies to stimulate consumption. This has balanced out the fourth-quarter drop.

"Full-year Chinese jewelry demand reached a three-year high of 672.5 tons, China's retail network extended further throughout 2018, with top branded jewelry retailers leading the charge," Wang said, adding that established brands were steadily increasing their penetration in lower-tier cities.

He predicted the jewelry sector will see a short-term boom in the Chinese lunar Year of the Pig. The animal is considered adorable, which creates a feel-good factor, and could spark buying.

A number of gold brands have released new designs featuring the Chinese zodiac. For example, sales volume on Chow Tai Seng's e-shop on Taobao, China's biggest e-commerce platform, reached about 5,000 pieces of its pig pendant containing 1.2 grams of gold in 30 days to Feb 2.

Creative product designs are the key to winning young consumers' hearts, said Wei Jianfeng, general manager of Chow Tai Fook, an established gold brand. The company has been putting in efforts to create intellectual property in the form of gold jewelry designs that would appeal to younger consumers.