The Indian and Chinese Connection to Gold

In 2023, India overtook China as the most populated country in the world, with a total of 1.428 billion people. China is a close second at 1.425 billion citizens. Compare that to the United States of America’s total population at 335 million. This matters to the gold market because Asian demand from India and China make up nearly 50% of global gold demand.

A Little History

During the last half of the 1900’s, Chinese citizens were banned from buying gold, halting a long-standing cultural tradition in that country. However, as the Chinese government began easing those restrictions in 1990 and by the early 2000’s the gold market was completely liberalized. China’s annual gold consumption surged during that time period from just over 375 tons in the early 1990s to a record high of 1,347 tons in 2013. Since then, China has ranked year after year as the world’s largest gold buyer. 

As the Chinese economy grew and modernized that helped provide fuel for fresh gold demand as Chinese citizens became wealthier. “This surge in demand was not just an expression of exuberance by Chinese investors free to buy gold. It was also driven by explosive economic growth, rapid urbanization and the desire for a simple alternative to the limited range of investments available domestically,” the World Gold Council explained. 

China’s Central Bank is Steady Gold Buyer

Today, it’s not just Chinese citizens that are buying gold, the Chinese government has been steadily stockpiling gold over the past year. In October, the People’s Bank of China added to its gold holdings for the twelfth consecutive month in a row. In October 2023, the PBOC bought about 740,000 troy ounces, according to official data, which is equal to about 23 tons. 

Indian Gold Buying Traditions

In October 2023, Indian citizens celebrated two major Hindu festivals: Dussehra and Diwali. This is a time period when buying gold is considered auspicious. India’s gold imports in October surged to a 31-month high, marking a 60% increase from the previous year. Indian citizens traditionally buy and hold gold. The precious metal is interwoven into the cultural fabric of the nation and is included in marriage ceremonies and other cultural rites.

India is the world’s second largest consuming gold nation behind China. In India, gold is not a luxury item, but a valued asset that is also a basic form of savings and wealth preservation, especially for families in rural areas. In India, even the poorest citizens buy gold. One in every two households in India purchased gold within the last five years, according to an ICE 360 survey. A total of 87% of Indian households own some amount of gold. Two-thirds of India’s gold demand comes from rural areas, where most people live outside the official tax system.

The Eastern Approach to Gold Buying

People in the Eastern half of the world have long retained a world view around gold with the knowledge passed down from their ancestors who saved in gold for centuries. They learned that gold doesn’t lose its purchasing power and is a store of value and a wealth building tool for future generations. This is ancient wisdom that many Americans still haven’t fully acted upon. Have you?

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