In a run-up to the festival, sales reportedly jumped by over 50% in the first weekend in January from the previous year, with consumers rushing to stock up on the precious metal. Gold is bought for decorations and gifts for the New Year and Chinese demand has clearly helped boost prices given the massive increase in retail buying, say traders.
Retailers who have been tracking the market said dragon-embossed gold bars and dragon figurines were particularly popular in the Asian country, with consumers preparing to welcome the year of the dragon under the Chinese zodiac sign. The dragon, especially the water dragon, is supposed to bring luck in wealth, so gold has become a popular gifting icon this year in China.
"Gold is at a six-week high in the international market, clearly boosted by the New Year celebrations in China. The symbol of the dragon this year will ensure hectic activity in bullion, way past the annual celebrations. Sometimes, astrology and an innate belief in tradition helps push demand,'' said Ravibhai Sawant, manager at a bullion retail store in Zaveri Bazaar, who is also selling gold bars embossed with a dragon spitting fire in his Mumbai showroom.
"The Chinese New Year is one of the largest celebrations, along the same lines as Indian festivals, and lots of gold is bought as presents. If one tracks the precious metal regularly, gold has fallen only twice in the past 10 sessions and has risen over 7% in January,'' said another retailer.
A bullion analyst noted that the price of gold had dropped to $1540.90/ounce (oz) at the end of December, but had managed to swing nearly $100 since the start of the year. "It is like Diwali celebrations in India. Before the onset of the festival, gold prices start moving northward. By the time the actual date of the festival dawns, gold has climbed high enough. To avoid this, many consumers do their shopping at least two weeks before the festival starts,'' he added.
Some analysts alluded to the fact that high imports in November showed strong demand from the retail sector. China's gold imports from Hong Kong shot up the highest in November 2011, time enough for investors and the general public to buy gold gifts for the ongoing festive season.
China bought 102,779 kilograms from Hong Kong in November, up from 86,299 kilograms (kg) in October, according to the Census and Statistics Department of the Hong Kong government. China's gold imports rose 20% from the previous month. For the first 11 months of 2011, China imported 389 tonnes of gold via Hong Kong.
Though rising incomes have helped spur demand for gold, equities in China on January 10 also posted the biggest three-session gain since October 2010, with news that the government would loosen monetary policy to spur economic growth. China is the second biggest gold buyer after India.
Traders noted there are several rituals during the New Year celebrations that are also fuelling demand. To ensure a prosperous and healthy year, one should enhance and stimulate positive energy flow at home, at business and at work. "This can be achieved by getting new dollar bills from the bank, inserting the new dollar bills into the red envelopes with a small gold coin and sealing it with a red banner which has symbols of good fortune all in gold leaf,'' said a retailer.
They add that the craze for gold is evident all over the world. Even as luxury watch brand Piaget exclusively created 20 dragon watches to celebrate the year, the U.S. Treasury launched the Year of the Dragon dollar bill. At the exclusive London store, Harrods, special gold bars with the dragon motif imprinted on it are displayed on shelves, while in some restaurants in India, Chinese customers will eat special dumplings, which are shaped like ancient Chinese money—gold ingots.
Shivom Seth, Mineweb