It seems breaking news regarding escalating Chinese gold demand is having a hard time keeping up with the pace in which Chinese gold demand is escalating. Everywhere I turn it seems that topic headlines much of the breaking gold news. I found something, though, that may put a little different perspective on the topic.
It's been about 4 years since China relaxed rules for gold ownership by its citizens. At that time, reports estimate the size of the middle class population of China was 18% of its total - about 180,000,000. Evidence shows it is the middle class that is purchasing gold at the behest of government to protect against the devaluation of foreign currencies.
Today that number is estimated to have risen to 230 million which may well account for China's fivefold increase in gold imports throughout the first 10 months of this year. Here's where it gets interesting. The size of the middle class population is expected to rise to 600 million by 2015. That's 100 million people per year. If each of those newly dubbed middle class buys just one ounce of gold next year, that amounts to more than 300 tonnes of new gold demand. At today's prices that amounts to an additional $140 billion.
Last year, Chinese gold imports came in at 45 tonnes. Compare that to 209 tonnes in the first 10 months of this year and you see one big reason gold prices are up over 27% so far in 2010. I am sure it is safe to conclude that even without a new batch of middle class making their way to prosperity, China gold demand will grow regardless. This just adds to the pressure.
And if this isn't enough to evidence why the gold bull market has longer legs than a Victoria Secret Angel, consider this statement found today in another Bloomberg article highlighting Chinese gold demand.
As I pointed out in yesterday's article, a shift of just one percent of U.S. Household assets to gold would bring an additional $422 billion of demand to the gold market. We've already gone through periods where the U.S. Mint has had to announce they are out of gold. Look for similar announcements in days or months to come.
My only hope is that China does not end up with all the gold cause I only like Chinese food once a month or so. And the only Chinese I speak is Number 24 please.
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