China and India: The Asian Gold-Buying Phenomenon

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The ever growing purchasing power of the Chinese and Indian general populations throws bearish fundamental analyses of the gold market into disarray.

China and India are the world's two largest consumers of gold - and the former is the world's largest gold miner. To many the future path of the gold price is inextricably related to the world's two most highly populated nations, both of which are undergoing internal growth at a phenomenal rate in comparison with anything Western nations are able to achieve— even in a major turn round from the recent recession. And such a turnaround seems increasingly far away.

What is particularly important for gold market followers is that both nations' populations seem to have an inbuilt propensity to hold gold. For India this has always been the case. For the Chinese it is a more recent phenomenon, perhaps because it is only recently that much of the general populace has had the wherewithal to invest, but basically it is a desire which is prevalent throughout virtually all Far Asian nation states.

Now even if a tiny fraction of India and China's huge populations are seduced into putting some of their savings into gold— and in both countries there is a culture which supports savings (of which gold can be seen as a part) which has long been forgotten in the West. What an impact this can have on the gold market globally. . . .Whatever some analysts and economists say about gold fundamentals not supporting a gold price increase, the likely growth in demand from personal investment in the East could confine such basic statistical analyses to the rubbish heap.

Let the economists stick to fundamental analyses on global monetary flows and economies which tend to follow more set patterns. There are too many unknowns and uncertainties involved in tracking fundamentals for a commodity like gold where much of the demand can be down to a large section, and a growing one in terms of wealth and numbers, of the global population's inbuilt perception of seeing the yellow metal as the ultimate store of wealth, or even as adornment to demonstrate their wealth and position to their fellows. Normal production and consumption statistics can only form an incomplete part of the overall picture.

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