The World Gold Council recently released a new report which saw China overtake India as the largest purchaser of gold in the world. China now accounts for 25% of gold investment demand, compared with India's 23%.
Here CFD trading and spread betting company City Index takes a look at a few possible reasons for the Chinese gold drive, and what this means for your spread betting strategy.
Culture
Gold gifting is a significant part of Chinese culture, having been associated with good luck and emperor status since ancient times. Birthdays, weddings and New Year celebrations are all still occasions upon which gold is typically bestowed or exchanged, and this tradition contributes to the country's gold demand.
Wealth
The World Gold Council believes a rise in the disposable income of the Chinese middle class also has a part to play in demand. This increase is likely a result of economic acceleration due to the reforms taking root in China. In 2005, just 15 million households in China had an annual income of more than $4,300 per annum.
Hedge
With a global year-on-year increase of 11%, gold consumption is attributed by the World Gold Council to investment demand. With persistent high inflation levels in China, investors may view gold as an effective hedging tool.
City Index
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, City Index transacts in excess of 1.5 million trades every month for individuals in over 50 countries worldwide.
City Index offers access to a wide range of instruments including margined foreign exchange, contracts for difference (CFDs) and, in the UK, financial spread betting.
Customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support.
Spread betting and CFD trading carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary.
Content approved / provided by City Index Limited which is a company registered in England and Wales, number: 1761813. Authorised and Regulated by the Financial Services Authority. FSA Register Number: 113942.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Gold Spread Betting: Chinese Gold Demand', Review by D. Jones, last update: 22-Jul-11
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