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Customers lined up to buy investment-grade gold bullion yesterday, when it went on sale for the first time in Shanghai since 1949 -- making a mockery of retailers that refused to sell gold bars earlier this week, claiming there was no demand for it due to high world prices.
Responding to numerous phone calls from eager buyers, Shanghai Lao Feng Xiang Co. Ltd., the city's leading gold jewelry processor and retailer, decided to sell 15 kilograms of bullion on a trial basis. It's safe to say the trial was a success as almost all the gold bars were sold within two hours yesterday afternoon.
"We had prepared to launch the bullion in Shanghai some time next month. However, we changed our minds as we received more and more phone calls from residents asking to buy bullion," said Chen Kui, an executive with China Gold Coin Co., the country's sole wholesaler of gold coins and bullion.
A total of 14 kilograms of bullion -- in bars of 50 grams and 100 grams -- was sold to buyers who had placed orders during the past half-month.
And the remaining kilogram was sold quickly over the counter, according to Shi Xiaofeng, a sales manager with Lao Feng Xiang's Nanjing Road outlet.
"One man purchased 10 bars at once. People were really crazy for gold items," he said.
Some buyers were a little too eager to test the gold.
"Many wanted to take a bite of the bar, so I had to stop them," one saleswoman said. Biting gold is a traditional way of testing its quality, as pure gold is very soft.
The success of yesterday's trial run could change many retailers' thoughts about selling gold.
"When the world market stood at a six-year high late last week, no one dared to take the business from China Gold Coin. If citizens gave a cold shoulder to the bars, we would have to take the losses all by ourselves," said Lao Feng Xiang's Shi.
While the bars are bought as an investment, there is currently no place in Shanghai to cash them in, although officials with China Gold Coin is working with several banks to set up a buyback system within the next few months.
Some analysts say yesterday's sale was helped by a correction in world gold prices after they had risen for several weeks due to concerns about the possibility of war in Iraq.
Gold was selling for US$347 a troy ounce on world markets yesterday, down from a recent peak of just over US$350 last Thursday. The bullion at Lao Feng Xiang sold for 102 yuan (US$12.34) a gram (US$382.19 a troy ounce) yesterday. The price was fixed by China Gold Coin based on the floating prices on the Shanghai Gold Exchange.
While some analysts question the investment value of gold at current prices, others see it as a good hedge against inflation.
"Gold is a traditional investment tool for people to combat against inflation. Although you cannot reap quick profits from trading gold as you might on a stock market, investing in bullion is much safer due to its small fluctuations," said Wang Lixin, China manager for the World Gold Council.
Sales were so good yesterday that China Gold Coin is worried it doesn't have enough bars to meet the demand.
A similar gold rush in Beijing, Nanjing and other cities has led to a shortage, said the company.
(eastday.com December 26, 2002)
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