Chinese New Year 2012: Year of Dragon Said to Boost Gold

The Chinese New Year celebration is expected to increase strong demand for gold in Asia, according to industry experts.

Gold is traditionally bought as a gift during the Chinese New Year, and 2012 looks set to be a strong year for demand said Albert Cheng, managing director, Far East, of the World Gold Council, in a statement. We see this as part of a longer-term trend.

The gains would build on heightened activity last year. In the third quarter of 2011, Chinese demand for gold jewelry was up 13 percent compared to the prior year, making it the single last market, with 28 percent of global sales, according to the World Gold Council. China's share of global gold demand has increased from just 6 percent in 2000. Demand for gold bars and coins was up 24 percent compared to the prior year.

This remarkable shift in the global demand balance has come about as the combined forces of growing wealth, deregulation, and increased access, but heightened economic concerns have also compelled consumers to act on their deep affinity for gold, said Cheng. The Chinese have a strong affinity to gold, which has been present in Chinese history since the time of the Han Dynasty. Even today it is regarded as a sign of prosperity, an ornament, a currency and an inherent part of Chinese religion.

A weak economy may drive more Chinese to invest in gold, which is often regarded as a safer asset that retains its value despite changes in currency.

China's demand is developing from a historically low base and we anticipate that this trend will continue, said Cheng. Near-term inflationary expectations and rising income levels are likely to support the investment case for gold as an asset class, especially given that Chinese consumers are high savers and are looking to gold to protect their wealth.