China's Demand for Gold and Silver Increasing

Pinnacle Digest writes: Despite the US employment numbers rising at the fastest pace since February, gold managed to climb to nearly a two week high of $1726 per ounce in early trading.


Adrian Ash reported that “The private-sector ADP payrolls report said the US added 158,000 jobs in October. Earlier data from the manufacturing sector in China, the world's #2 gold consumer, showed its slowdown to be easing.”


The news from China is more of a boost for the commodity market, in our view, than the US employment data. However, Ash notes in his recent article that two-thirds of Chinese businesses reporting quarterly results to the stock market have seen a sharp rise in unpaid bills, according to the Financial Times. This is a sign of how bad the Eurozone economy is - China’s biggest export region. To show just how fragile the Chinese market is right now, Adrian Ash explains that “The People's Bank of China has this week pumped a record $60 billion-worth of liquidity into its domestic money market.”


China has become the second largest consumer gold market in the world - and quickly approaching number one. This is why it is so critical for precious metal investors to monitor the state of the country’s economy.  With a strong economy in China comes strong demand for gold at the consumer level.


Looking further ahead, and "supported by the continual income growth of [China's] emerging middle-income class, investment as well as gold products will benefit," says Albert Cheng, managing director for the Far East at market-development organization the World Gold Council.

"The longer-term growth of China's economy remains healthy."


Demand for precious metals in China doesn’t end with gold. In fact, Ash explains that the Antaike Research Group, a state owned entity in China, forecasts that demand (within China) to buy silver will grow by 10% in 2013. Just yesterday silver hit a two week high of $32.65 per ounce.


Click here to read Adrian Ash’s full report on recent activity in the gold and silver markets.