Economic uncertainties push yellow metal to forefront of wealth management
Gold holdings will increase among Chinese high net-worth individuals next year as uncertainties loom in capital markets, experts said, as wealth preservation and security top their asset management priorities.
According to a report released by the World Gold Council earlier this month, among the Chinese affluent, wealth preservation and security exceeded in importance to increasing the value of their wealth.
This is based on a survey of 218 wealthy Chinese with an average personal investable asset of 6 million yuan ($837,670), aged over 40 and with a minimum investment experience of two years.
According to the survey, the majority — 90 percent — have either invested or expressed willingness to invest in the yellow metal, said the report.
Jia Shuchang, a senior analyst from the WGC, said stability is currently the major wealth management purpose, and this has intensified after the COVID-19 pandemic.
The stress on security is reflected by their investment choices.
While cash and savings crowned the list of asset management choices, onshore insurance came in second, followed by A shares and investable properties.
Gold is the fifth most popular asset management option at present, according to the WGC report.
“As a globally accepted asset, gold’s advantages in higher liquidity and risk diversification have increased its appeal to the rich group,” said Jia.
Uncertainties will abound in the capital markets next year, including tightening liquidity, geopolitical conflicts and an increasingly noticeable trend of de-globalization.
Making investment portfolios more defensive will be especially important against this backdrop, he added.
The WGC said gold prices surged nearly 10 percent in 2022 at a time when the benchmark Shanghai Composite Index slid over 15 percent and the renminbi depreciated more than 8 percent.
The bullish performance continued this year, with prices of yuan-denominated gold spiking over 16 percent during the first 10 months of 2023 despite soaring interest rates and aggravated systemic financial risks worldwide.
Both spot and futures prices of the precious metal crossed the $2,100 mark on Dec 4 to hit new highs.
Gold is an effective asset to guard against inflation and risk, according to the high net-worth individuals polled by the WGC, who cited bullion’s hedging function during the 2008 global financial crisis as an example.
A continued expansion in the number of wealthy Chinese will underpin demand for gold, Jia added.
There are 2.11 million households with a net family wealth of at least 10 million yuan in China in 2023, and this is 50,000 more than the statistics compiled a year earlier, according to Hurun Research Institute, a Shanghai-based institution that tracks the affluent.
The average consumer price index for these people had increased 3.9 percent year-on-year by July, as discovered by Hurun, while the national average was a contraction of about 0.3 percent during the same period, said the National Bureau of Statistics.
This indicates the high consumption ability and enthusiasm of wealthy Chinese, which will translate into continued momentum for the country’s economic growth, said Rupert Hoogewerf, founder and chairman of Hurun.
However, stability is a focus area for these high net-worth individuals when it comes to cash planning. Such a conservative attitude may not change significantly in the next three years, he added.
Allocating 6 to 10 percent of their investable assets to gold, the rich group usually considers gold as a long-term investment target, holding it for six to 10 years, according to the WGC.
Physical gold, especially 100-gram and 20-gram gold bars, is especially favored by affluent Chinese, as these are easy to carry and can be converted to cash more quickly.
According to the WGC, demand for gold bars and coins in China surged to 82 metric tons in the third quarter despite soaring gold prices, representing the strongest third-quarter performance since 2018.
In the first nine months, China’s demand for gold bars and coins reached 197 tons, up 26 percent year-on-year, said the WGC.
Meanwhile, China’s total demand for gold jewelry reached 481 tons in the first three quarters, up 8 percent on a yearly basis.
The country’s demand for gold jewelry has offset declines in other regions, stabilizing global gold jewelry demand, said Roland Wang, CEO of WGC (China).
Wealthy Chinese individuals’ interest in gold is in accordance with central banks’ increased holdings of the precious metal.
According to the WGC, central banks worldwide bought a net 800 tons of gold in the first three quarters of 2023, the highest on record for that nine-month period. The net buying is 14 percent higher than during the same period in 2022.
The People’s Bank of China, the country’s central bank, has been the biggest gold purchaser in 2023, according to the WGC.
The Future Fund, Australia’s sovereign wealth fund, said late last year that it will add gold to its portfolio to combat inflation and increase its defensive play.
In December 2022, Russian Direct Investment Fund, Russia’s sovereign wealth fund, raised the limit for gold investment to 40 percent, from the previous ceiling of 20 percent.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
