Will Gold Buying from Arabia Outpace China?

Source:

"Rumors of gold hoards buried in the Arabian Desert may not be so far off the mark."

The latest WGC report concludes that Chinese gold consumption could double in the next decade if its economy continues to grow rapidly.

China is presently the world's second largest gold consumer, accounting for 11% of global demand.

1970s Gold Boom

In the 1970s, gold boom the Middle East market drove gold prices higher and higher. The region is still a huge gold market, consuming 250 tons last year (admittedly down 28% from the year prior due to the economic recession that hit Gulf expatriates especially hard.

In November 2008, ArabianMoney reported on a record $3.5 billion purchase of gold by Saudi Arabian investors. Many of these gold deals go unreported and are metal deals between individuals, often of very substantial size.

Rumors of gold hoards buried in the Arabian Desert may not be so far off the mark. But the scope for con-men to hone such stories into believable investment opportunities is legendary and due diligence is called for in any such transaction.

Among the super-rich of Arabia, gold has become a very popular safe haven asset without third-party risk. In the wake of global banking and investment crises and scandals, the absence of a third party is particularly desirable.

Gold as Money

In short, there gold is money. The recent rally in global stock markets has also been treated with much skepticism in Arabia. It would be surprising if investors here emerged as net buyers of global equities rather than sellers into this rally.

It would also not be surprising if Arabian investors were quietly amassing gold to avoid sending the price up when news of their massive transactions emerged.

Could it be that gold buying from Arabia will outpace China in the future, if it is not already actually doing so behind closed doors?

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