China Giving Gold Prices Support

China and Gold Price Support

Even though there has been a pull back in gold prices lately, leading the usual clueless commentators to question gold prices going forward, China remains a solid customer of gold, and recent changes in their laws had freed up its citizens to acquire more jewelry and hold a bunch of physical gold.

Of course this is small potatoes compared to the inflation and safety factor being priced into investing in gold, and that isn't going to change for a long time to come.

But adding the physical gold freedom in China and you have even more reason for gold to continue to rise for years to come.

China and Gold Price Support

Middle East Jewelers Say Gold Sales are Dropping

Last year those jewelers in the Middle East thought they were going to have another banner year, but contrary to that assumption, prices have declined, rather than increased by the 15 percent expected because of the alleged demand.

The problem is gold is now considered by the middle class there as a means of generating income because of the high prices.

“Middle income earners are selling rather than buying to gain profit,” said Mohammed Abdullah. “Most of our customers buy gold and jewelry for personal use rather than as a form of investment. We hope prices will drop but in view of what is happening with the market’s fluctuations, I don’t believe this will be the case."

Other gold shop owners said their business is down, but nowhere near some of those that say sales are down by up to 70 percent.

As a more experienced shop owner said, “Our sales dropped only five percent compared to last year.”

It seems what's happening is the surge in the price of gold has brought a lot of newcomers into the field, who don't know how to manage the ups and downs of the business. That is probably what's accounting for the large disparity in sales declines.

Either way, contrary to Asia, physical gold sales have fallen in this part of the world over the last year.

Not Everyone Bothered by Drop in Gold Prices: Ask Asian Jewellers

After Thursday's drop in gold prices of over $100 an ounce, Asian jewellers scrambled to buy gold for their trade.

India, unsurprisingly, was a very busy market, as the world's largest consumer of gold continues to buy on the drop in gold prices, as their wedding season is in full swing.

Along with the long-held custom of building up a daughter's dowry from her birth, Indians also distribute it to one another for a number of special occasions. That, and using it for jewellery, as well as an investment, makes gold so important to the Indian people.

Another key Asian buyer of gold has been Vietnam, whose 12 percent inflation rate last year has kept them buying gold as an inflation hedge.

"Vietnam is buying gold even when it's trading at record highs this month. For them it's more for a hedge because inflation was more than 12 percent last year," said a dealer in Singapore. "Nobody wants to keep dollars because it's depreciating."

Other countries where gold is in high demand for jewellers are Thailand and Indonesia.