India and China, the power engines of the East, are now the force behind the rising gold demand. If Chinese and Indian customers stop buying the yellow metal, the bullion market will collapse within days. So much is the power of rising middle class in China and India that they are rising in both number and percentage terms dramatically, as these nations are developing on every front.
Their disposable income is rising faster than even they imagined. Historically China is a nation of savers so it is not surprising that the Chinese government is encouraging investment in gold. The average Chinese saver saves up to 40% of his income. To date he has been largely confined to bank deposits, as he is only now getting familiar with the Chinese Stock Exchanges.
The volatility of the Stock Exchange tends to deter the new prudent investor. Gold is thus seen in a better light than the Stock Exchange.
China's central bank said in a statement recently that it will allow its banks to import and export more gold as part of a program to push forward the development of the country's market in the precious metal. This is part of the on-going effort to further liberalize the gold market and broaden gold's appeal throughout China. China has long been unable to fully explore gold demand. This is another step along that road.
Add to this the fact that India and the rest of Asia have always loved gold. In fact from Greece eastwards gold is valued not only as a good store of wealth, but as liquid money. They are now finding that they can afford it. The three most populous regions of the world are China, India and Indonesia. Add peripheral regions and you have more than half the world's population getting richer by the day.
In the past few weeks, physical bullion demand in the emerging world has come back to life. In Turkey July saw a jump of nearly 40% in gold imports. Indications are that scrap sales of gold are drying up and there is a need for dealers to import gold now.
In 2009, Turkish gold imports fell to 37.6t from 165.9t in 2008. Turkey is the world's third-largest gold consumer and the world's largest jewelry exporter with markets in both mature and emerging economies.
As such, Turkey is a good barometer for global gold jewelry demand. In the Middle East good signs of a recovery in the demand for 24 carat gold are being seen.