Shenzhen, a major gold market which produces 70 percent of the country’s gold jewelry, has seen a gold rush in recent months. Different ways of making a profit in the fluctuating gold market are popular with residents and investors. However, after gold prices swept to new highs for five consecutive weeks, the upward trend shifted down more than 3 percent last week, adding to risks in gold investment although a number of analysts predict a continuing upward trend despite the fall.

    This page means to provide information and serve as a reference. It is not investment advice.

    Jane Lai

    OCTOBER is a difficult month for Liu Jun. The middle-aged businessman was attracted to invest in gold days ago following recent rounds of housing curbs that significantly reduced his dividends. But after gold prices swept to new highs for five consecutive weeks, the upward trend shifted down a bit Oct. 18.

    “I’m worried, but hopefully my gold investments can bring me good news, the dollar is not safe now anyway.” If the dollar grows stronger, gold prices typically weaken, and vice versa.

    Liu is one of many eager fortune hunters being attracted by the increase in gold prices and swarming into the gold investment markets to buy up physical or paper gold.

    Gold futures on the New York Mercantile and Commodity Exchange (COMEX), a principal division of the world’s largest physical commodity futures exchange, the New York Mercantile Exchange, fell US$38.1 to close at US$1,334 an ounce Oct. 19 after setting a record high of US$1,377.6 Oct. 14. The U.S. dollar reversed course abruptly after a 13 percent drop since June.

    But a number of analysts predicted a continuing upward trend despite the slight fall, saying it was based on a minor and, more importantly, transient rebound of the dollar after the United States released a series of better economic figures than predicted.

    Before the U.S. midterm elections in November, the dollar would continue to depreciate while the RMB would appreciate and gold prices would go up, Jia Fang, senior analyst with the Beijing-based China CIFCO International Co., told media last week.

    Perhaps that’s why the gold markets in Shenzhen, which produces 70 percent of the country’s gold jewelry, have become red hot since Oct. 1.

    A lot of retailers at the Shuibei International Jewelry Trade Center said the sale of gold jewelry had recently grown at least 20 percent in recent months.

    The State-owned Shenzhen Dutyfree Group’s jewelry world in the Huaqiangbei area in Futian District had sold out of 500 and 1,000-gram gold bars several times since Oct. 1.

    Several retailers said 30 percent of their customers were former real estate investors.

    A man who gave his name only as Feng bought 2 kg of gold bars recently. “The housing curbs are killing investor profits and the risks of gold investment are relatively small. Many of my friends have more gold bars than me.”

    Meanwhile, because gold prices in Hong Kong have always been cheaper than on the mainland, there has been an increasing number of mainland Chinese looking for gold jewelry across the border.

    Chow Tai Fok, Chow Sang Sang, TSL and Luk Fook stores had all reported booming sales since the holiday. Their average gold price is about 40 yuan (US$6) cheaper than offered by mainland jewelry sellers.

    Tips

    Where to buy paper gold

    Industrial and Commercial Bank of China, Bank of China, China Construction Bank and China Citic Bank with a personal identification card or a passport and a bank card. Suitable for short-to-medium term investment.

    Where to buy physical gold

    Shanghai Gold Exchange (cheapest), banks, Shenzhen Dutyfree Group and gold companies. Suitable for long-term investment.

    Be aware of

    Gold retailers, gold certificates, color, weight, hardness, transaction fees, whether and how long the investment can be traded, the percentage in your diversified portfolio.