Commodities Monthly - China's gold trading fever
- While China is successfully slowing demand for most 'hard' assets, it keeps promoting Gold ownership, as announced in their "Guiding Opinions on the Promotion of the Gold Market" published in 2010.
- Gold trading volumes on the Shanghai Gold Exchange (SGE) increased 28% year-on-year. Volumes are poised to rise further, as the agency business was transferred to 20 commercial banks in 2010.
- While 5 commercial banks offer paper-Gold trading products, only one (ICBC) offers Gold Accumulation Plans (GAP), a savings account where clients can redeem accumulated savings in physical form.
- While the number of GAP clients (1.65 million) is impressive, the potential is large, as they currently represent only 0.7% of ICBC customer base. A new GAP product will help drive up demand.
- Customers route 10% of their income into GAP. If penetration increased to 10%, GAP clients would consume 11% of the yearly Gold supply. This is significant for one product in one country.
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