In addition to the desire of central banks, especially the Central Bank of China, to buy gold, in recent months, with the continuing geopolitical tensions and global economic uncertainty, the markets are witnessing an increasing interest by young people to invest in the precious metal, especially in Asia, even as its prices shatter record levels.
Following the wave of Chinese buying gold grains (small, pebbly-like pieces of yellow metal) from e-commerce platforms in a way similar to shopping for retail goods, young people in South Korea are buying gold bullion from small stores that offer these bullion in the sales list such as hot cakes, sausages, and others.
Since last April, one of the largest convenience store chains in South Korea, CU, has offered a variety of gold bars the size of a fingernail, weighing between 0.5 grams and 1.87 grams, in cooperation with the Korean Minting and Security Printing Company (COMSCO), according to the report. A report published by CNBC.
The report indicated that people in their 30s are the most active in buying these gold bullion, which represents more than 41 percent of total sales since its launch, and people in their 40s represent 35.2 percent of sales, followed by people in their 50s with 15.6 percent. While people in their twenties represent 6.8 percent of total sales.
A 1.87-gram bar is sold for 225,000 won (US$165.76), a 1-gram piece is sold for 113,000 won, and a 0.5-gram piece is sold for 77,000 won.
The World Gold Council, in turn, noted the trend of increasing interest in investing in gold among young people in Asia, as it said in its latest report that the demand for bullion and coins in South Korea rose by 27 percent on an annual basis to 5 tons in the first quarter of the year. This was amid the rise in prices of the yellow metal, noting that this was the largest quarterly increase in gold purchases in South Korea in more than two years.
“Usually in times of economic uncertainty when the value of the local currency declines, demand for gold jewelry increases as local investors seek to invest in safe haven assets,” said Heng Kun How, head of global economics and market strategy and market research at UOB, according to the Gold Exchange. In Korea, gold prices rose to a record high of 456 thousand won ($335.3) per 3.75 grams, or 0.13 ounces.
Consumers in China are also buying gold, as collecting small one-gram pills in glass jars has become a trend among the country’s youth, and China is also leading consumer demand for bullion, as it has become the largest buyer of gold jewelry in the world.
The lure of promising wealth
Ali Hamoudi, CEO and Chief Investment Officer at ATA Global Horizons, said in his interview with “Iqtisad Sky News Arabia” website: “Gold is always seen as a wealth preserver and carries the temptation of promising permanent wealth, and this is generally the Eastern culture and its view of gold in general. But demand for physical gold around the world is on the rise, and it is not just investors who are buying the yellow metal.”
According to the World Gold Council, demand for gold in 2022 reached 4,741 tons, the highest level since 2011. The world’s central banks were the largest buyers, and global demand for gold in 2023 – excluding over-the-counter trading – reached 4,448 tons, which is the level About 5 percent lower than the strong performance in 2022, while demand in the first quarter of this year rose 3 percent on an annual basis to 1,238 tons, recording the strongest demand in any first quarter since 2016, supported by over-the-counter trading activity.
Unattractiveness of traditional savings assets
As for China, Chinese consumers have flocked to gold with weak confidence in traditional investments such as the turbulent real estate sector, or the stock exchange. At the same time, the Chinese central bank is adding gold to its reserves on a regular basis, while reducing its holdings of American debt securities, according to Hamoudi. .
Markets analyst Hamoudi states that China already has significant influence in the gold markets, but the country’s influence has become more evident during this latest bullish wave – a nearly 50 percent increase in the global price of gold since late 2022, and the price of gold has continued to rise to new levels despite… One of the factors that traditionally makes gold a relatively less attractive investment is high interest rates and the strength of the US dollar.
Therefore, investing in gold has become more attractive, especially for young investors, as traditional investments have become less attractive, as the real estate sector in China, the traditional destination for the savings of most Chinese families, remains in crisis, and investor confidence in the country’s stock markets has not yet fully returned, as The performance of a series of large investment funds targeting the wealthy was very poor after failed bets on the real estate sector, according to him.
Hamoudi added: “This shows that with the presence of a few better alternatives, money flowed into Chinese funds that trade in gold, and many young people began collecting what is known as (gold grains) in small quantities, and this does not only happen in China, but the popularity of… Gold among young investors around the world refers to the impressive role that gold plays as a store of wealth, this generation that witnessed the boom and then decline of the stock market, the bankruptcies of some real estate companies, banks, and cryptocurrency trading companies, and the collapse of some housing markets such as China, in addition to global geopolitical fluctuations. From the Russia-Ukraine war to the Ukrainian war.”
As for South Korea, the CEO and Chief Investment Officer of ATA Global Horizons points out that young investors believe that ongoing inflation, currency depreciation, and banking crises in the United States and Europe have undermined consumer confidence. They now look to precious metals, and gold in particular, as a safe haven that will enable them to protect and grow their wealth in the long term.
In this context, it is interesting and should be mentioned that gold has a special importance in South Korea, where it is generally given to newlyweds and young children, and this cultural practice also explains the success of gold bullion vending machines installed in many shopping centers and public places in the country, according to What Hamoudi said.
Asset diversification
For his part, Shaocai Fan, head of global central banking at the World Gold Council, said: “Many Asian economies are dealing with inflation and financial uncertainty for the first time in a generation. It makes sense that many young investors are exploring gold as a way to diversify and protect their assets.”
Attractive prices
In turn, Amr Abdo, co-founder of Market Trader Academy for Financial Market Studies, said in his interview with “Iqtisad Sky News Arabia” website: “Young people in Asia are buying gold because it has become available to them, close to them and within their reach.”
He pointed out that gold merchants there have begun to innovate new ways to offer gold as an acquisition tool, just like buying game cards, and not just for investment.
In addition, gold prices have become attractive in light of the unattractiveness of traditional savings assets in Asia, such as real estate, according to Abdo, who pointed out that real estate prices in China, for example, have deteriorated for about ten months in a row in more than 40 Chinese cities, which has changed the destination of savers. From the real estate sector to gold, including young people.
In recent months, gold prices have reached unprecedented record levels, the last of which was in the April 12 session when it reached $2,431.29 per ounce.
During early Friday trading, gold recorded an increase, heading towards recording its best weekly performance since April 5, after economic data reinforced bets that the Federal Reserve (the US central bank) would lower interest rates, as it rose 0.2 percent to $2,350.87 per ounce, and prices increased by about 2.2 percent. percent since the beginning of the week.
It is worth noting that the total purchases of gold by central banks during the year 2023 amounted to about 1,037 tons, of which China’s share was 225 tons. The Chinese Central Bank added 60,000 ounces of bullion to its reserves last April, according to the latest data issued last Tuesday.
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