Gold exchange traded funds have revolutionized gold investment around the world over the past decade. Yesterday the Shanghai Daily reported that the China Securities Regulatory Commission has published provisional regulations for the operation of such gold ETFs in the People’s Republic for the first time.
There was no timetable laid out for the introduction of the ETFs. CSRC officials said they need to study throughily how to protect investor interests in the new products. But clearly this is something of a red letter day for gold.
Biggest gold market
China is already the world’s biggest gold producer and consumer, with its gold output reaching 361 tonnes in 2011, according to the China Gold Association. That year the value of gold product transactions surged 53 per cent year-on-year to $395 billion at the Shanghai Gold Exchange.
Last month ArabianMoney reported that China’s Ministry of Industry and Information Technology expects gold consumption to surpass 1000 tonnes by the end of 2015 (click here). It said this would ‘widen the fundamental market shortage’ and noted that the shortage of supply will persist in the coming few years as domestic gold supply ‘might only reach 450 tons by that time.’
China is the sleeping giant in the gold market that is about to wake up with its 1.3 billion people soon to have access to gold investment via the very convenient method of ETFs. Think what this new demand will mean for a commodity whose supply cannot be expanded anything like so easily.
Time to buy?
Rising demand and limited supply must equal higher prices, and that will lead to higher demand again and still higher prices. It is amazing to see such long faces on the gold bugs today when such a prospect is only just around the corner. That of course means present price set backs are just a buying opportunity.
What will $50 or $100 on or off the price of gold mean in the context of $11,000 an ounce gold? Peanuts really unless it scares you out of the market altogether and you miss out on the lot!