Gold’s Sun Also Rises in the East

During the second quarter, gold’s rising value didn’t deter Chinese and Indian buyers. In its webcast, the World Gold Council (WGC) said these “predominant drivers” of gold demand accounted for “52 per cent of bars and coins and 55 per cent of jewelry demand.” China’s demand grew 25 per cent, while India saw an increase of 38 per cent. WGC attributes this growth to “increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.”

I often write about these festivals to showcase these countries’ strong appreciation for gold. Recently I highlighted the Varalakshmi Vratham festival in India and how offering prayers to the symbol of prosperity and wealth is said to be incomplete without a touch of gold. Read “Indians Celebrate Holiday with Offerings of Gold” now.

China and India aren’t the only emerging markets with deep traditional and cultural affinity for the metal. Vietnam, Indonesia, South Korea and Thailand – labelled by the WGC as the “VIST” countries – are additional key gold-consuming countries.

The WGC’s chart below shows a potential opportunity in increased demand for gold, especially in jewelry, in the VIST countries. In 2010, demand rose to 253 tons after a sharp drop in 2009. Jewelry demand, however, was historically low while investment demand grew considerably.

Gold Demand 081811

Similar to China and India, the VIST countries have had a 2,000-year long relationship with gold which is intertwined in their culture, religion and economy. Jewelry and investment demand are one and the same, says the WGC: “The demand for gold as a store or accumulator of wealth, as an auspicious gift or as insurance against unforeseen risks, is to a large extent independent of the form it takes.”

This strong tie to gold means that, as wealth among residents of Vietnam, Indonesia, South Korea and Thailand increases, price is less of a consideration, and gold will continue to be at the top of their shopping lists.

As always, the WGC’s quarterly webcast was full of detailed information about worldwide supply and demand for gold. The organisation is highly regarded for its comprehensive coverage of gold, from Western demand driven by the “Fear Trade” to the Far East where the growth is much more substantial, yet overlooked by many. I encourage you to catch our Web event in September when I’ll be discussing this topic with special guest Jason Toussaint from the WGC. It’s a great way to get the rest of the story. Click here to add this event to your calendar.