Markets

Gold rush pushes trading to record high

By Zhou Yan (China Daily)
Updated: 2010-07-08 10:14

BEIJING: Domestic investors' gold frenzy pushed trading volume of the yellow metal to an historic high in the first half of the year, with gold imports also surging to a record.

China's gold price increased 25.2 percent in the first half of 2010 to reach an average of 251.9 yuan ($37.16) per gram.

The global gold price rose 26 percent to $1,152.2 per ounce on average in the same period, driven by growing demand amid concerns that the debt crisis in Europe and the shaky economic recovery in the United States would drag the euro and the dollar down further.

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Turnover in gold traded at the Shanghai Gold Exchange was up 58.7 percent at 3,741.5 tons in the first six months of 2010, in which spot goods volume reached 834.6 tons, according to Song Yuqin, vice-president of the exchange.

The exchange's combined trading volume in 2009 stood at 4,710.8 tons, worth 1.03 trillion yuan.

"The plummeting domestic stock markets amid the central government's measures to rein in property bubbles have created a prosperous gold market, greatly enhancing the exchange's turnover," Song said in Beijing on Wednesday.

He added that investors' appetite for gold to hedge against inflation risks also led to huge growth in gold imports in the first half, when the imported amount approximately equaled the total volume in the past three years, without giving specific figures. Song said that further rises in gold consumption and the trading volume could be expected.

Individual accounts in the Shanghai Gold Exchange reached 918,500 by the end of 2009, more than double the figure from a year earlier. Meanwhile, the total turnover by individual investors was almost six times higher to 438.5 tons.

China is the world's largest producer of the yellow metal, with an annual output of around 280 tons, and is the second-largest consumer of the metal after India. According to the World Gold Council, (WGC) China's total demand for gold - for both jewelry and investment - reached 423 tons in 2009.

The council said that China has emerged as the world's fastest growing consumer of gold.

"Gold is not particularly volatile if compared with other commodities, and demand for gold has shown considerable resilience across the economic cycle," said Eily Ong, an investment research manager at the WGC adding that gold as an inflation and dollar hedge tool achieved returns of 280 percent in 10 years.

"Investors will remain the principal driver of prices this year, with a price of $1,300 per ounce being a strong possibility in the second half," said Philip Klapwijk, chairman of GFMS Ltd.