Yellow metal rising! Gold investment sparkles as prices soar

With the dramatic rise in international gold prices, many Chinese investors are looking with interest at the yellow metal, an investment where risks and opportunities coexist.

International gold prices have been soaring since February 28. On March 6, the London spot gold price reached an intraday high of US$2152.24 per ounce, surpassing last year's record. On March 8, the international gold price rose to a new high of US$2195.15 per ounce.

"The recent rise in gold prices is mainly due to the weakening United States economic data, coupled with geopolitical risks, including central bank gold purchases, and the inflow of funds," said Xu Ying, chief analyst of macro strategy at Orient Futures.

Consequently, the contract price of the Shanghai Gold Exchange Au99.99 in the night trading session on March 5 rose to 503.99 yuan (US$70) per gram, breaking through 500 yuan per gram for the first time.

Meanwhile, domestic gold jewelry prices also been rising. As of Monday, the domestic retail price of Chow Tai Fook gold, Lukfook Jewellery gold, CHJ gold, and TSL gold was up to a record high of 666 yuan per gram.

Some citizens have seized the golden opportunity to make a fortune. It is reported that in Hangzhou, neighboring Zhejiang Province, a young investor invested in 1 million yuan worth of gold in early 2023. The sharp rise in gold prices saw his investment realize a nearly 50 percent jump in value within one year.

CFP

On March 27, China Construction Bank announced that it will increase the starting amount for the personal gold accumulation business from 500 yuan to 600 yuan, effectively raising the threshold for gold investment.

In 2023, the national gold consumption was 1,089.69 tons, up 8.78 percent over the same period in 2022. Among which, gold jewelry accounted for 706.48 tons, with a year-on-year increase of 7.97 percent, while there were 299.60 tons of gold bars and coins, surging 15.70 percent annually, according to statistics from the China Gold Association.

Chinese are now paying increasing attention to physical gold investment, leading to the high consumption of gold bars and coins, which have relatively low premiums.

"Gold prices are affected by a variety of fluctuations. One should have a certain risk-aversion ability, and get out of the common misunderstanding of believing gold to be a static value preservation product," explained Dong Ximiao, chief researcher of Merchants Union Consumer Finance.

Domestic gold investment at present takes various forms, including purchasing physical gold bars or coins, gold certificates issued by commercial organizations, gold futures, and gold funds.

In terms of choosing gold investment methods, Shi Cheng, Huatai futures researcher, suggested: "If it is purely financial investment, gold bars and similar varieties are not highly recommended due to the difficulty in getting them liquidated. Investors with securities investment experience can consider gold ETF (exchange-traded fund) varieties. Gold futures, on the other hand, need higher requirements for risk control."

"It is necessary to pay close attention to the situation of the (US) Federal Reserve's interest rate cuts as well as geopolitical changes, for the intensification of any regional conflict will further change the investment logic," said Zhao Xu, fund manager of ICBC Credit Suisse Asset Management.