China, Other Asian Countries and Gold

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"Asian states individual wealth is now rising faster than anywhere else in the world"

In his latest analysis of the gold sector, U.S. precious metals economist, Jeff Nichols, poses the question: "Will strong physical demand from China, India and other important Asian gold markets continue to underpin the price, set an effective floor beneath the market, and limit downside risks?"

He says yes, noting recent strong gold demand from the East Asian and Middle Eastern region, which also serves as a reminder of the region's growing importance in the world of gold. Although different in many respects (economically, politically, culturally), many countries across Asia and the Middle East share a historical affinity and allegiance to gold.

Add to this the recent speculation that China is running down its own gold reserves in the interests of securing more gold without disrupting the market too much, is aggressively marketing gold as an investment to its own rapidly growing middle class, and that its top state-owned bank, the world's biggest, has just entered into a gold marketing cooperation agreement with the World Gold Council, and it seems this part of the world will be calling the tune on gold for the next many years, whatever the Western bullion banks, IMF and some central banks may try to do about this.

But perhaps the point is, it's not just China—which is key—but the whole Asian and Middle Eastern region has a long history of gold consumption and where, particularly in India, China and the southeast Asian states individual wealth is perhaps now rising faster than anywhere else in the world. India too is marketing gold as an investment to its people through state-owned banks and the post office, and other nations have reduced their restrictions on gold ownership.

Meanwhile, there are signs too that there are the beginnings of a re-appearance of the price-sensitive side of Eastern demand.

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