MUMBAI - Beijing becoming host to Asia's first automatic gold vending machine -
in a continent where millions are yet to see the variety that spews paper cash
and potato crisps - offers the latest indication of China and India being
world's leading gold buyers, despite record fluctuating prices mid-September.
Year-on-year consumer demand for gold in 2010-2011 grew 38% in India and 25% in
China, compared with a 7% worldwide growth of gold sales. Global prices are
around US$1,650 an ounce after hitting an historic high of $1,921.15 on
September 6 on a 6%-plus rise since June.
Accounting for over 55% of global craving for the noble metal, India and China
ensure gold remains a trusted refuge of
investment in an ailing world economy, weakened further with the deepening debt
crisis in Europe and United States.
On September 25, China joined the United States, Germany, Italy and the United
Arab Emirates, in having ATMs that dispense bullion and gold coins. In
Beijing's 800-year old Wangfujing shopping district, buyers can now use bank
cards and cash to induce the machine to pop out certified gold.
A scanner attached to the ATM recognizes the two-dimensional bar code in each
gold bar or coin dispensed. The scarlet and yellow ATM with a touch screen
dispenses gold bars and coins of various weights. Prices are based on current
market rates and updated every 10 minutes.
Each withdrawal at the Wangfujing ATM is capped at 2.5 kilograms of gold, worth
about $156,500. The gold ATM will have no shortage of audience - each day, over
a million people visit this 1.5 kilometer stretch from East Changan Street to
the China Art Museum.
Gongmei Gold Trading, the company that installed the ATM, expects to install an
astounding 2,000 more of such gold-vending machines across China.
"To put residents' cash deposits into gold deposits can reduce cash flow and
reduce pressure on commodity prices," Gongmei company president Zheng Ruixiang
told state-owned China Daily.
Li Weizhou, operations manager of Gongmei Gold Trading, expects the gold-doling
ATMs to be a big hit in China. The plan is to install more of the same in
private clubs, banks and landmark buildings in major Chinese cities. By
November, the Chinese gold-vending machines are expected to include a gold
buy-back facility.
Mumbai might soon join this gold ATM club. India is the world's largest
consumer of gold, followed by China, and its overall jewelry market, including
diamonds, is estimated at $101 billion, with 60% of it being domestic sales.
India's thirst for gold seems to be growing, having bought a record 963.1
tonnes of gold in 2010, 66% more than the previous year. China consumed 579.5
tonnes of gold, a 27% hike in annual sales, according to data from the
London-based World Gold Council.
The world too is seeking more monetary security in gold, buying 919.8 tonnes of
the shiny metal worth $44.5 billion in the second quarter of 2011. It was the
second-highest ever quarterly value recorded, says the latest World Gold
Council's Gold Demand Trends (GDT) report released in August. It was
fractionally below a record $44.7 billion in the last quarter of 2010.
India is estimated to own over 18,000 tonnes of gold, about 11% of the global
stock. The approximately $1.1 trillion worth of gold nearly equals the $1.2
trillion net worth of its equity markets.
India's remarkable interest in gold makes an odd contrast for a country where
over 400 million people subsist on less than a $1 a day. Even post offices have
now taken to selling gold, alongside stamps and postcards. India Post aims to
sell about one tonne of gold coins in the next two months of festivities, from
700 post offices, at double the quantity of gold coins it sold in 2009-10. The
nine-day Navaratri festival began on September 29. Diwali, the festival of
lights, follows in October.
"The increase in sales of gold coins is mostly because large companies find
them suitable as gifts and incentives," says Mehul Choksi, chairman and
managing director of Mumbai-based Gitanjali Gems, the world's largest
integrated jewelry retailer. "Individual consumers buy gold coins as a small
purchase for maintaining tradition of gifting gold on auspicious occasions."
India's enduring gold rush enabled the prosperous presence of Gitanjali and the
other jewelry retail majors like the Tata-group owned Tanishq. Gitanjali has 12
jewelry-making units feeding 3,000 global sales outlets. Among the 60 Indian
and international brands that Gitanjali owns, nine of its major Indian brands
were recently valued at $1.12 billion.
Now gold is hitting a wider market through coins, such as through China's gold
ATMs and India's post offices. "The demand for coins in India, it must be
emphasized, is not at the cost of jewelry demand, which continues to be strong
across India," Choksi said in an e-mail to Asia Times Online. "Gold coins are
being chosen as the best form of corporate gifting, even above other popular
consumer products like electronic items, because they hold immense traditional
value for Indians, and have a long-term investment value as well."
Choksi, sometimes called the "King of Gold", is known for his innovative
thinking. Gitanjali Gems transformed India's gold market from stodgy jewelry
shops to being a trendy lifestyle product, with designer brands and slick
marketing campaigns.
Choksi has widened operations in China and the US. The latest acquisitions of
the Gitanjali Group include the 120-year old San Francisco-based Samuels
Jewelers. He plans to expand in China, from the current 20 Gitanjali-branded
jewelry stores in cities such as Beijing and Shanghai, to 100 stores in 2012.
While Asia is a traditional gold stronghold, jewelry industry leaders expect
India's gold rush to grow by 25% in the coming festive season through to
December. India even has two days every year traditionally declared to be as
"auspicious" for buying gold, the Dhanteras, before Diwali, and Akshaya Tritiya
in May.
Gold grips India to the extent that it is a major investment even in rural
India, with smaller towns accounting for over 60% of India's gold purchases.
With India heading to be the world's largest economy by 2050, the future looks
golden for gold - despite price fluctuations particularly when investors cash
in their gold holdings, to offset other losses such as in equity markets.
Central banks worldwide are raising their gold reserves to hedge against market
risk, even as other Asian countries drive up gold demand. Thailand, Indonesia
and South Korea had record increase in gold sales in 2010.
While 74% of South Korea's gold consumption of 47.9 tonnes in 2010 went in
manufacturing semiconductors for its electronics industries, Thailand used gold
more as investment vehicle. Gold bar and coin investment in Thailand rocketed
to an all-time high of 51.2 tonnes in 2010, compared to the annual average of
12.6 tonnes for the past 15 years.
Thailand also joined the few Asian countries with stock exchange-traded gold
investment instruments, to hedge against the fluctuating US dollar. Its
Thanachart Fiscal Gold Funds in March 2011 joined Hong Kong's Value Gold and
the Japanese Mitsubishi "Fruit of Gold". By August, within five months of its
launch, Thanachart had doubled its gold assets.
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