WEBVTT - Why Are Chinese Consumers So Keen on Gold?

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>At the center of Shanzhen, a city in southern China

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<v Speaker 2>not too far from Hong Kong, lies a special little

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<v Speaker 2>district called Choi Bai. Choi Bay is known as a

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<v Speaker 2>place to go if you're looking to buy one specific thing.

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<v Speaker 1>Tribe is among the largest gold retail markets in the world,

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<v Speaker 1>and definitely the largest in China by volume of gold.

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<v Speaker 2>That's Bloomberg reporter Chong Jingle based in Hong Kong.

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<v Speaker 1>So if you go to the Shribune market there are

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<v Speaker 1>like more than ten thousand business clustered across several city blocks.

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<v Speaker 1>You will be greeted by endless rows of glittering jury

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<v Speaker 1>that would make your head spin, and at almost any

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<v Speaker 1>time of the day, the place always buzzes with crowds

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<v Speaker 1>of customers eagling, browsing, selecting, and snapping up their favorite pieces.

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<v Speaker 2>The popularity of this market has been fueled in part

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<v Speaker 2>by live streamers who hog their gold on doin Chinese TikTok.

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<v Speaker 2>And while gold has always been a popular commodity in China,

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<v Speaker 2>the investment demand for the precious metal is attracting attentionately.

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<v Speaker 1>With the slowdown in the Chinese economy, people have been

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<v Speaker 1>shrinking their spending on all kinds of goods. Joey purchases

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<v Speaker 1>like diamonds have really taken a hit as Chinese buis

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<v Speaker 1>have tightened their belts, But the allure of gold as

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<v Speaker 1>the safe place to park one's cash remains, and we

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<v Speaker 1>are seeing consumers showing percent and demands for investment products

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<v Speaker 1>like gold bars and coins as a way to safeguard wealth.

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<v Speaker 2>Welcome to the Big Take Asia from Bloomberg News. I'm wanh.

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<v Speaker 2>Every week we take you inside some of the world's

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<v Speaker 2>biggest and most powerful economies and the markets, tycoons and

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<v Speaker 2>businesses that drive this ever shifting region. Today on the

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<v Speaker 2>show China's Gold Rush, Why are Chinese consumers so keen

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<v Speaker 2>on the precious metal, what's driving the dizzying rally in

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<v Speaker 2>gold and how long will it last? Gold is popular

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<v Speaker 2>all over the world, but in China the commodity is

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<v Speaker 2>appreciated on a whole other level. The Chinese love gold.

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<v Speaker 2>It's not just a symbol of beauty, luck and fortune.

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<v Speaker 2>In China, gold often means something special and marks important milestones.

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<v Speaker 1>So when you're born, it's typical for others to give

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<v Speaker 1>you golden bracelets for your wrists and ankles, and when

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<v Speaker 1>you get married, you door yourself in gold. In Hong Kong,

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<v Speaker 1>where I'm based, during the wedding banquet, brides will be

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<v Speaker 1>covered in gold ornaments. I'm talking about gold bengals stacked

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<v Speaker 1>up to the elbows. These oversized twenty four cara gold

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<v Speaker 1>necklace are usually in the shape of pigs, which symbolizes well,

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<v Speaker 1>prosperity and fertility. And gold is also just the kind

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<v Speaker 1>of jury that you can pass on for generations.

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<v Speaker 2>Cho Jing, who was born in mainland China, grew up

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<v Speaker 2>understanding gold special role not just in Chinese culture, but

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<v Speaker 2>also for her family.

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<v Speaker 1>Actually, my parents had this ritual like every couple of years,

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<v Speaker 1>dates strolled into a bank like casually by some gold bars,

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<v Speaker 1>brinted home and locked away like it was the family treasure,

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<v Speaker 1>and there comes Lou the new year. They'd dust off

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<v Speaker 1>the statue and let me marvel at the shiny golds

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<v Speaker 1>bars like I was holding a piece of pirate.

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<v Speaker 2>Louwait, so they would like on lunar new Year, open

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<v Speaker 2>up the safe and bring out the gold.

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<v Speaker 1>Yes, and there would show the goads to me and say, look,

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<v Speaker 1>this is our treasury.

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<v Speaker 2>Wow, now, out of curiosity, how many bars would there be?

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<v Speaker 2>Typically this is a secret, of course, chong Jing says.

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<v Speaker 2>A lot of older Chinese stash their gold at home.

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<v Speaker 2>She says it's kind of a tradition. The older generation

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<v Speaker 2>like to have their wealth where they can see it

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<v Speaker 2>and touch it when they want to. They prefer that

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<v Speaker 2>to keeping it in an account in some faraway bank

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<v Speaker 2>converted to a currency that risks depreciating with inflation. But

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<v Speaker 2>recently chong Jing noticed that buying gold isn't just a

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<v Speaker 2>thing that older Chinese do. Young people in China are

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<v Speaker 2>now also flocking to the gold markets.

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<v Speaker 1>We have seen young people spending their savings often not

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<v Speaker 1>too much like on gold purchasing. Actually, consumers aged eighteen

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<v Speaker 1>to thirty four now make up over a third of

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<v Speaker 1>gold jury sales.

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<v Speaker 2>And changing what kind of gold are they buying?

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<v Speaker 1>They usually buy small pieces of gold jewelry around five

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<v Speaker 1>to six grams. It's just like small pieces gold ear rings,

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<v Speaker 1>gold bracelets, and gold rings. I don't think young people

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<v Speaker 1>are so much into gold bars. They're usually into like

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<v Speaker 1>gold beans, those little things.

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<v Speaker 2>Gold beans like the size of a jelly bean.

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<v Speaker 1>Yes, what do you do with gold beans. They just

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<v Speaker 1>save it in a small bottle. Every month they will

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<v Speaker 1>collect a gold bean and put it into the bottle,

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<v Speaker 1>so it's.

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<v Speaker 2>Like a little visual piggy bang of gold beans. Yes,

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<v Speaker 2>exactly changing. Talk to several young people who bought gold

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<v Speaker 2>in Shroi Bay, some of them even traveled across several

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<v Speaker 2>provinces some hundreds of miles to the market. They told

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<v Speaker 2>her that Shoibet is a great attraction for a couple

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<v Speaker 2>of reasons, and not just for the gold.

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<v Speaker 1>First, it's because there are a lot of good quality

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<v Speaker 1>knockoffs Ashrebe. You can get jury pieces that look just

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<v Speaker 1>like those from VanClief and Oppos or Tiffany's just for

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<v Speaker 1>a fraction of the cost.

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<v Speaker 2>Another main draw is Shroybet's straightforward pricing system.

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<v Speaker 1>So jury here is sold on a simple formula, which

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<v Speaker 1>is really interesting. So the formula is a base gold

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<v Speaker 1>price packed to the exchange benchmark and the craftsmanship fee

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<v Speaker 1>of around ten ym program and a lot of people

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<v Speaker 1>will bargain for the price.

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<v Speaker 2>Schroy Bay isn't just the largest gold retail market in China,

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<v Speaker 2>it's also a manufacturing hub, which means.

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<v Speaker 1>You can also diy your own design theer. You can

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<v Speaker 1>go there and melt your jury into gold bars, and

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<v Speaker 1>you can also do the opposite, melt your gold bars

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<v Speaker 1>into diy jewelry.

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<v Speaker 2>So you can actually bring literal gold that's sitting around

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<v Speaker 2>your house and they'll melt it in front of you. Yes,

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<v Speaker 2>Chong Jing says. Young people in China used to think

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<v Speaker 2>gold jewelry was tacky, something the nuvo riche would wear

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<v Speaker 2>to show off. But that's changing, and now young consumers

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<v Speaker 2>are stashing gold for the same reason as their parents.

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<v Speaker 1>They see gold as a secure option compared to other investments.

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<v Speaker 1>You know, at a time when the Chinese stock market

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<v Speaker 1>has seen a lot of turbulence, the economy has been

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<v Speaker 1>hammered by the slump in the real estate market. That's

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<v Speaker 1>really sent consumer confidence plunging, not to mention a depreciating currency.

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<v Speaker 2>This frenzy demand from China helped push the country to

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<v Speaker 2>beat India as a world's top consumer of gold jewelry.

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<v Speaker 2>In twenty twenty three.

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<v Speaker 3>Gold and Focused a just shy of twenty eight hunundreds

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<v Speaker 3>dollars here, but this is off note. It is an

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<v Speaker 3>all time record high. Yet again, a fresh record for

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<v Speaker 3>the safe haven here.

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<v Speaker 2>And how long can the gold rally last and will

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<v Speaker 2>a new president in the White House change its course.

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<v Speaker 2>That's after the break. Gold prices reached a record high

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<v Speaker 2>of about two thousand, seven hundred and ninety dollars per

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<v Speaker 2>ounce last October. Analysts say central bank buying is what's

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<v Speaker 2>been driving gold prices up. Here's Samantha Dart, co head

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<v Speaker 2>of Global Commodities Research at Goldman Sachs.

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<v Speaker 3>It's been the dominant driver of the upward gold moved

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<v Speaker 3>since twenty two. The moment that Russian financial assets were blocked,

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<v Speaker 3>then that sparks a lot of concern from a lot

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<v Speaker 3>of emergin markets, and in particular that who knows this

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<v Speaker 3>might happen to them one day. So central bank buying

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<v Speaker 3>has stepped up significantly fivefold from the average that we

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<v Speaker 3>observed prior to twenty twenty two.

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<v Speaker 2>And Bloomberg's changing Lee says China's central bank has been

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<v Speaker 2>front and center of the gold rally.

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<v Speaker 1>The People's Bank of China went on gold buying spree

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<v Speaker 1>for eighteen three months in twenty twenty three that ended

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<v Speaker 1>in a pro last year. This was its longest ever

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<v Speaker 1>run of purchases. It was looking to diversify its reserves

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<v Speaker 1>away from the dollar and hedge against currency depreciation, and

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<v Speaker 1>after a half year break, in November, shortly after the

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<v Speaker 1>gold reached its historical high, the Chinese Central Bank actually

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<v Speaker 1>resumed its gold buying, so we can see how caen

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<v Speaker 1>they are on buying the precious medal even as gold

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<v Speaker 1>prices remained elevated.

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<v Speaker 2>Besides China's central Bank, there have been other factors driving

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<v Speaker 2>gold prices.

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<v Speaker 1>Up last year. The gains in gold were also helped

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<v Speaker 1>by the US Federal reserves pivot to a loser monitored policy,

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<v Speaker 1>and when FED was in a rate cutting cycle, so

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<v Speaker 1>when the interest rate comes down, demand for interest based

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<v Speaker 1>safe haven investments like bonds may fall, leaving a safe

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<v Speaker 1>haven void in many portfolios. This helps boost the demand

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<v Speaker 1>for gold, but looking ahead, gold may face some pressure

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<v Speaker 1>as FED officials have emphasized the need to take a

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<v Speaker 1>more cautious approach to cut RAAIG this year because they're

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<v Speaker 1>starting to again worry about inflation.

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<v Speaker 2>Gold prices in January have eased since October's record, but

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<v Speaker 2>they remained some thirty percent higher year on year, and

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<v Speaker 2>ongoing global turmoil from unrest in the Middle East to

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<v Speaker 2>political chaos in South Korea is expected to sustain the

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<v Speaker 2>demand for gold.

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<v Speaker 1>So when politics get messy, gold gets popular.

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<v Speaker 2>I always say tariffs is the most beautiful word.

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<v Speaker 3>To me in the dictionary.

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<v Speaker 2>And because tariffs gonna make as rich as hell, it's

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<v Speaker 2>going to break our countries. Business is back.

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<v Speaker 1>Tensions from a potential trade war between US and China

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<v Speaker 1>or with the US's other top trading partners could drive

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<v Speaker 1>gold prices and demand for the safe haven asset, and

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<v Speaker 1>traders are also watching out for what implications US President

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<v Speaker 1>Donald Trump's domestic policies would have, such as on tariffs,

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<v Speaker 1>tax cuts, and immigration. All of these economists say could

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<v Speaker 1>impact the country's finances and re ignite inflation.

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<v Speaker 2>So changing it's a pretty complicated picture when it comes

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<v Speaker 2>to gold, but that doesn't appear to have lessened its

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<v Speaker 2>appeal to Chinese buyers. What's your sense on how long

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<v Speaker 2>this gold mania might last?

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<v Speaker 1>Annaly say the market our looker remains strong because gold

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<v Speaker 1>is a symbol of wealth and prosperity, and people always

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<v Speaker 1>buy jury as gifts for festivals and these. There are

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<v Speaker 1>also analysts saying that consumers often delay or cut back

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<v Speaker 1>on gold purchases when prices rise sharply, so there might

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<v Speaker 1>be a little volatilities out there, but this will not

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<v Speaker 1>change the fundamentals of gold consumption in China, which is

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<v Speaker 1>which is people like gold and will buy it.

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<v Speaker 2>This is The Big Take Asia from Bloomberg News. I'm

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<v Speaker 2>wan ha and a happy Lunar New Year to all

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<v Speaker 2>of you who celebrated. This episode was produced by Young Young,

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<v Speaker 2>Naomi and Jessica Beck. It was mixed by Omer Sultan,

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<v Speaker 2>sound designed by Jessica, and fact checked by Young and Naomi.

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<v Speaker 2>It was edited by Caitlin Kenny, Patty Hirsch, Jessica Joe,

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<v Speaker 2>and Sybylla Gross. There was additional reporting by Alfred Sound.

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<v Speaker 2>Naomi Shaven is our senior producer, Elizabeth Ponzo is our

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<v Speaker 2>senior editor, Nicole Beemster Bower is our executive producer, and

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<v Speaker 2>Sage Bauman is Bloomberg's head of Podcasts. Please follow and

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<v Speaker 2>review The Big Take Asia wherever you listen to podcasts.

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<v Speaker 2>It really helps new listeners find the show. See you

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<v Speaker 2>next time.