by John Galt
July 17, 2016 21:45 ET
The “Big Mothers” in China are buying gold in much larger quantities because they expect global instability and currency rate disruptions
No, no, no, not that Big Mama, more like the women shopping here:
The truth is astonishing as this story tonight from the South China Morning Post reveals:
Chinese customs data released last week showed imports from Hong Kong to the mainland increased in May mainly due to cross border shipments to meet mainland customer demand.
China’s total gold imports in the first half of this year amounted to 173 billion yuan (HK$200.6 billion). Of that, 45.8 billion yuan was gold imported from Hong Kong, up 5.5 times year on year.
Gold imports from Hong Kong represented 25 per cent of all imports of the precious metal into China in the first half of this year, compared with only 2.8 per cent in the same period last year. In comparison, the amount of gold China imported from Switzerland in the first half dropped 30.5 per cent year on year, South Africa fell 23.1 per cent and Australia decreased by 31.5 per cent.
Jasper Lo, chief executive of King International, said many mainlanders, especially “Big Mother”investors – elderly ladies who like to invest in the metal – were major buyers of gold, which has risen in price by 28 per cent this year, up 6 per cent in the last three weeks.
HK$200.6 billion is about $26 billion in U.S. dollars so that is quite an impressive increase. What is even more astonishing from the article is why they purchased the precious metal:
“Mainland Big Mother investors…have one more reason to invest in gold – it is a good hedge for the falling value of yuan. When many expected the yuan would continue to devaluate further this year, this led the Big Mothers to invest in gold instead,” he said.
Wow. That’s the exact opposite of what many CNBS commentators guffaw at when anyone mentions purchasing that “barbaric relic” known as gold. However, there is even more from this article that should raise an eyebrow:
The flight to safe haven assets like gold would continue because currency markets have became more chaotic post Brexit and tensions rose when Beijing rejected the ruling by the international tribunal in the Hague against China’s claims to contested areas in the South China Sea, Lo explained.
“This has led to fear of military confrontation. These [factors] all support gold prices going up and investors will continue to buy gold, which would increase demand for gold imports from Hong Kong in future,” he said.
In other words, a bunch of older women in mainland China have enough common sense to act as a leading indicator of upcoming gold demand globally as they can foresee a prolonged period of global currency devaluations and currency disruption as well as the potential of a military conflict with China. As well as that, they have calculated that the ongoing currency war will create massive devaluation and inflation which means their savings will lose value if just allowed to sit in the banks.
If these little old ladies have figured out there is massive trouble coming soon, why haven’t you?