2011 Chinese Demand for Gold Overtakes Developed West (Combined!)

Here are some charts on China's demand for gold that'll make your jaw drop.  Courtesy of Frank Holmes, writing for Kitco.com:

The World Gold Council (WGC) released its quarterly “Gold Demand Trends” report last week and, as always, it was filled with fascinating data on the strength of the global gold market. Gold demand grew 11 percent to 981.3 tons during the first quarter of 2011, worth $43.7 billion at quarter-end’s price levels.

This isn’t exactly a new phenomenon in China. From 2007 to 2010, investment demand grew at a compounded annual growth rate of 68 percent, according to the CPM Group. The firm forecasted Chinese investment demand to increase 34.7 percent during 2011 but based on this new data, it may need to adjust its forecast.

Song Qing, director of Shanghai-based Lion Fund Management, told Bloomberg news that, “Gold has taken on a new role in China amid concern about inflation…Just imagine the total wealth in China and even a small percentage of that choosing to buy gold. This demand is going to be enormous.”

Full article: Asian Tiger Sinks Teeth Into Gold

And this chart here says it all:

I was scratching my head, along with my friend here in the US, wondering who the heck was buying all of this gold during its recent run up.  Then I went over to Asia, and saw with my own eyes - the West is not driving this market any longer.  And this chart certainly says it all.

Interestingly, I learned that the same phenomenon has been taking place - to an even more dramatic degree - with rare, Chinese collectibles.  My wife's friend's father is an extremely wealthy Taiwanese businessman.  He's been collecting rare Chinese artifacts for the past 20-30 years.  Now that he's retired, he's starting to sell off some of his collection - and is doing so at astounding multiples of what he paid for the items (100x-1000x in some cases).

Now that the Chinese are minting new millionaires and billionaires, the supply/demand balance for rare historical artifacts is resulting in dramatic price increases.  And the same appears to be happening in gold, which is a trend the middle class can play themselves.

After all, what are they supposed to buy, other than renminbi, to store their wealth?  US dollars?  Euros?

This trend should remain in place, I'd guess, as long as real interest rates remain near zero, or negative, there (in theory real rates are about 1% today - if you believe that inflation is really running at 5%).

Hat tip to The Daily Crux for the tip on this link.