Gold Scams Rising in China as World Gold Prices Hit $2250 per kg, India Rs. 70,665 per 10 gms

·         Gold purchases have soared in China in recent years, with investors seeking safe-haven assets amid the weak stock market and ongoing property crisis

·         But a number of gold-related scams have been reported, including products containing silver and rhenium


[ABS News Service/01.04.2024]

China’s weak stock market and ongoing property crisis, which have wiped out the wealth of the key middle class, has coincided with a growing number of gold-related scams amid strong interest in the precious metal as an alternative investment.

Gold purchases have soared in China in recent years amid the overall economic slowdown, along with low interest rates offered by wealth-management products and limited access to overseas investments.

Earlier this month, a Beijing-based franchise of a well-known gold brand was sued for fraud in a scheme that had allegedly cheated more than 70 investors out of over 60kg (132 pounds) of gold, the National Business Daily reported late last month. The case is ongoing.

Some victims claimed they had invested in gold bars priced at about 350 yuan per gram from 2016, with the store promising to buy back their purchases in the future.

The retail price of gold jewellery in China has been as high as over 700 yuan (US$97).

But the store in central Beijing has closed, leaving victims unable to retrieve their gold bars.

China’s domestic gold jewellery consumption reached a record high of 282 billion yuan (US$39 billion) in 2023, according to the World Gold Council, which predicted demand would remain strong in 2024.

About 11.7 per cent of China’s middle-class families held gold as their primary financial product last year, according to a white paper on the new middle class released by Wu Xiaobo Channel, the independent financial media company linked to the prominent economic and financial writer.

The World Gold Council’s 2023 Chinese jewellery retail market insights found that products lighter than 10 grams, or valued at less than 2,000 yuan, contributed the most to retail sales, with China’s younger generation increasingly keen to buy gold for value preservation.

Wu’s report showed 58.52 per cent of Generation Z – those born between 1996 and 2010 – in China had plans to buy gold, believing that it preserved value.

New gold shops are seen in shopping centres and commercial streets from first- to lower-tier cities, as well as in less affluent counties, said Fred Qiu, a business development manager for a jewellery brand focusing on the east China market.

“The retail price of gold jewellery in China’s market has risen dramatically over the past year, but so far the consumer mentality is to buy more as its price rises because, in the average person’s mind, the risk of buying gold is lower than that of the domestic real estate and stock market,” he said.