In China, middle-aged women or older affectionately known as "grannies" have been snapping up large volumes of gold amid a recent price plunge. Now, some experts are worried that these "Chinese grannies" could lose money if gold prices fall further -- even as the women say they plan to buy more.
On April 15, gold prices fell sharply. Subsequently, for the latter half of April, Chinese bought 300 tons of gold, more than one-third of the gold China purchased in all of 2012, according to a report on the website of China News. April saw an increase in jewelry buying in China of 72.2 percent compared to April of 2012, with a total transaction of 30.3 billion yuan ($4.93 billion). Chinese media commentators even joked that Goldman Sachs -- which was urging clients to sell gold before it fell further -- might know gold, but it doesn’t understand Chinese grannies, referring to the images of hoards of Chinese women crowding into gold shops in China.
Some experts are now predicting an investment loss for Chinese grannies. From April 22-26, when gold transactions reached a peak, the average price of gold was about 292.01 yuan per gram, but now it has fallen to about 286 yuan per gram. Considering sellback fees that banks and gold shops charge, Chinese grannies’ gold has lost anywhere between six to 15 yuan per gram.
“Right now is not the best time to hold gold, as gold prices will continue to fall for the long-term,” said Ye Lingfeng, of the Southwestern University of Finance and Economics, Trust and Finance Research Agency.
Despite such gloomy predictions, Chinese grannies appear unfazed.
“How far can gold fall? If gold prices fall again, I’ll buy more and lower per unit cost,” said Weng Yonghui, who was withdrawing cash from the bank. Weng added that she plans to buy 50 grams of gold bars as a wedding present for her niece.
“Most of us are not buying gold to make money, but are keeping gold long-term for the next generation. We are looking at the long-term value of gold,” said Weng, noting that she doesn’t need cash at the moment so she will continue to buy gold.
Tong Min, who bought gold jewelry during the May 1 weeklong holiday, also isn't worried.
“I thought of it as a sale and went on a shopping spree,” Tong told China News.