Online channels shine with gold-backed financial products

Investors see in precious metal a safe haven and hedge tool in times of volatility

Sellers of gold-backed financial products are expanding their online sales channels and attracting more investors to the precious metal as a hedging tool and asset safe haven, analysts have said.

More than 20 internet-based service providers have launched gold-backed financial management products so far, including Tencent Holdings Ltd, which started enabling users to give digital red packets of physical-gold-backed assets that can be transacted in real time.

Zeng Yan, an analyst with Guibao Precious Metal Investment Co, said: “The rising price of gold and its nature as a hedging tool are the major reasons financial service providers are launching these products. They believe market fluctuation and investor sentiment are affected by uncertainties in the global economy. Going online is an effective way for gold to touch more investors, particularly young ones.”

Also, in China, the consumption of gold and physical gold investment are closely related and investors would like to buy gold when prices rise as they believe a rising price is a signal that the precious metal is maintaining value.

In 2016, gold’s price rose by 8.6 percent in US dollars, or rose by 18 percent in renminbi, much higher than the average yield of wealth management products developed by banks (3.81 percent) and trust (6.8 percent), according to data from Shanghai-based Wind Financial Information.

A report from the China Gold Association said in 2016, investment demand for gold bars rose 28.19 percent and for coins by 36.8 percent.

A report from the World Gold Council in 2016 said: “A four-year high in investment drove price gains and demand growth.”

Wang Lixin, general manager with the WGC’s China operation, said: “Innovations and the development of the gold market have been constantly boosting demand.”

For investors and users of online gold-backed financial management services, these new online channels help lower the threshold for physical gold investment.

In traditional channels, such as banks or retailers, physical gold is sold most often in the forms of bars or coins starting from 10 grams for more than 3,000 yuan ($436), while digital channels enable investment starting from 1g, or even smaller portions.

Online gold-backed products also help raise investors’ awareness about gold price trends and investment skills.

He Meixue, a 29-year-old graphic designer, said that digitalized gold investment has changed her attitude to gold. She received gold bracelets and necklaces as gifts from her grandparents but she never cared about their value and simply locked them away.

“I never regarded myself as a gold investor. My boyfriend gave me a digital red packet of 5.2g of gold on Valentine’s Day, which was about 1,500 yuan, not a huge sum but it aroused my curiosity about how price changes every minute. Now I check prices on my smartphone from time to time and I have now started learning about gold trading. I also realize that investing in gold does not guarantee good returns, because sometimes price can fluctuate wildly. The experience gets me much closer to gold investment.”

According to Xiao Lei, a researcher at G-banker.com, an online gold investment service provider, more financial institutions and internet-based technology companies are likely to introduce products and services benefiting gold investors, making investment in the precious metals category easier.

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