BEIJING (Commodity Online): As the year nears to a close and 2010 is all set to shine, there is gold glittering in the Chinese landscape. There is a mad gold rush going on across China as people are on the streets, swarming gold jewellery shops to buy coins, bars and ornaments during an year-end shopping spree.
China is today the world’s largest gold market. China recently overtook India and emerged as the largest gold consumer in the world. The dragon land is the largest global gold producer.

In this following feature, China Daily reports on the ongoing gold rush in China:

“Gold jewelry sales jumped more than 30 percent over the weekend in Beijing, as bargain shoppers swarmed the city’s major jewelry stores on year-end promotions.

In a collective sales campaign after international gold prices fell, stores including Caibai, Gongmei and China Gold reduced the pure gold’s price by as much as 9 yuan per gram, with more Christmas-themed jewelry designs for shoppers to choose from.

According to the Beijing Morning Post, the China National Gold has doubled its sales to 40 kg per day. Caibai, the largest gold store in China, reported 30 percent more business than last year over the weekend after they drop the price from 278 yuan to 269 yuan per gram.

But the pure gold’s price at Caibai is still 59 yuan per gram higher than last Christmas when it was sold at 210 yuan per gram.

“The gold price had kept rising in Beijiing this year, so this decrease somehow influenced customers’ decisions,” the marketing department manager of Caibai department who preferred to be known as Niu said yesterday.

Niu is also very optimistic about sales in the rest of the holiday season that spans from Christmas to the Chinese New Year in February. She said Caibai extended the trading hour from 8:30 to 9:30 pm on Christmas Eve, to serve the crowds of customers.

“I am looking for a gold pendant with a tiger on it,” said a 23-year-old woman customer surnamed Yang, who was born in the year of the tiger.

“I have had this idea since October, but the price just kept rising. It is going to be the year of tiger soon, and they dropped the price a little bit, so I want to buy it now,” she said on Friday.

Beijing residents showed keen interest when the limited edition gold bars for the Chinese Tiger Year went on sale earlier this month.

Caibai received 1.5 tons of orders while they were holding 1.3 tons of gold.

According to the Beijing Evening News, almost 20 kg of gold bars for investment were sold on Thursday morning after the price adjustment.

Beijing residents are also rushing to hoard the yellow metal, as they expect the economic inflation next year.

“I feel it is safer to invest in gold than other things in this period,” said a business consultant surnamed Bai, who has been investing in gold since September this year. “The inflation in Beijing is quite obvious, but I can still keep my wealth after the economic bubbles break in Beijing.”

THE OPPOSITION finance spokesman, Barnaby Joyce, believes the United States government could default on its debt, triggering an ”economic Armageddon” which will make the recent global financial crisis pale into insignificance.

Senator Joyce told the Herald yesterday he did not mean to alarm the public but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by a local state government.

”A default by the US means complete economic collapse around the world and the question we have got to ask ourselves is where are we in that,” Senator Joyce said.

His warning came as the Rudd Government ramped up its attack on Senator Joyce as an economic extremist by highlighting his strong opposition to Chinese sovereign investment in Australia.

The Treasurer, Wayne Swan, said it was a cause for concern that Senator Joyce had been elevated ”from the reactionary fringe of our economic debate to the second-most senior economic policymaking job in the alternative government”.

The scrutiny of foreign investment bids was adequate and ”if we were to follow the advice of some of the extremists on foreign investment, it could cost something like 20,000 jobs right across Australia”.

Senator Joyce said the chances of a US debt default were distant but real and politicians were not doing the electorate a favour by refusing to acknowledge the risk.

He said the Federal Government’s debt would push up interest rates and predicted that some state Labor governments would not be able to repay their borrowings.

”The Federal Government has $115.7 billion in debt, Australian government securities, notes and bonds on issue, and the states have another $170 billion in debt.

”We have to ask whether the states have the capacity to repay that. I would say in some instances they do not, particularly Queensland.”

Senator Joyce said that if the US recovered, global funds would flow back into North America. ”There will be only one way Australia will be able to keep funds here and that is by putting up interest rates, which will therefore bring real costs back to households,” he said.

”That is the first scenario, which is extremely bad for Australia. The worse scenario is where the US doesn’t repay its debt - the $2 trillion in debt it owes to the Chinese, the $1 trillion in debt it has to the Japanese and the $US1 trillion in debt to others - and then we are really nailed.

”The outcome is a shift away from the US dollar as the international trading currency and a shift to the Chinese yuan, and China becomes an immensely powerful player overnight.

”It’s the real financial crisis, and the real financial crisis will mean this preamble we have just had pales into insignificance.”

Asked what sort of contingency plan he would advocate, Senator Joyce said it was like trying to prepare for a tidal wave but the local economy should have more self-reliance.

”Things you look for in that economic Armageddon are the capacity to feed ourselves, the capacity to provide the fundamentals in medicines and basic fundamental requirements for our nation.”

“No other commodity enjoys as much universal acceptability and marketability as does gold.” - Hans F. Sennholz

The price of the yellow metal crashes Rs 500 on Saturday, adding to the 3.34% fall in last 2 days.

Bullion prices have firmly snapped their one-month bull run now. Profit-booking, triggered by the strengthening dollar, pulled down gold prices from their record highs.

In the last two days, domestic prices of the yellow metal have come down by Rs 620, or 3.34 per cent, with a fall of Rs 500 coming today. Internationally, gold has slipped 5.6 per cent in two days. It touched $1,226.44 an ounce on Thursday, while in Asian trade today morning, it fell to $1,161.43.

Ajay Kedia, director, Kedia Commodities, said, “Traders preferred to book profit ahead of the US holidays and, hence, there was low rollover and a fall in open interest in gold futures on the Comex Division of the New York Mercantile Exchange. A similar trend was observed on the Multi-Commodity Exchange (MCX), where the rollover in gold futures was lower than in the previous cycle.”

In the last 7 trading days, MCX’s open interest have come down by 33 per cent.

Kedia, however, feels the fall could be a correction after the recent bull run. In the last few months, gold has been rising consistently. In the last one month, gold went up from $1,059 on November 2 to $1,226 on Thursday.

Christmas holidays in the US start in the third week of December and traders avoided keeping open position as the Dollar index was trading at lower levels, indicating the currency may strengthen in the short term, making gold less attractive.

US employers reduced 11,000 jobs in November, which is the lowest job cut after recession set in last year. This has caused speculation that the US Fed may raise interest rates. Any rise in interest rates is expected to strengthen dollar on rising inflows. Generally, dollar and gold prices moves inversely. The Dollar index rose to 75.91 on Friday from 74.63 a day earlier.

Standard gold prices hardened to its all-time high of Rs 18,255 per 10 gm on Thursday on persistent buying by stockists in view of the rising trend in the global market. However, prices fell by Rs 500 per 10 gm to Rs 17,600 today.

This is the first major correction in prices since the Reserve Bank of India announced buying 200 tonnes of gold from the International Monetary Fund (IMF) a month ago.

Silver also shot up to Rs 30,270 a kg on renewed industrial demand coupled with rising global prices. Today it closed at Rs 29,445, down Rs 825 from its peak during the week.

Gold futures shot up to $1,226.40 an ounce on the Comex Division of the New York Mercantile Exchange following weakness in the dollar, which fell to a 16-month low. Gold closed at $1,161.42 on Saturday.

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

“There is a strong case to be made that we are already at ‘peak gold’,” he told The Daily Telegraph at the RBC’s annual gold conference in London.

“Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore,” he said.

Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia. South Africa’s output has halved since peaking in 1970.

The supply crunch has helped push gold to an all-time high, reaching $1,118 an ounce at one stage yesterday. The key driver over recent days has been the move by India’s central bank to soak up half of the gold being sold by the International Monetary Fund. It is the latest sign that the rising powers of Asia and the commodity bloc are growing wary of Western paper money and debt.

China has quietly doubled holdings to 1,054 tonnes and is thought to be adding gradually on price dips, creating a market floor. Gold remains a tiny fraction of its $2.3 trillion in foreign reserves.

Gold exchange-traded funds (ETFs) – dubbed the “People’s Central Bank” – have accumulated 1,778 tonnes, making them the fifth biggest holder after the US, Germany, France, and Italy.

Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far.

Output fell a further 14pc in South Africa last year as companies were forced to dig ever deeper - at greater cost - to replace depleted reserves, not helped by “social uplift” rules and power cuts. Harmony Gold said yesterday that it may close two more mines over coming months due to poor ore grades.

Mr Norman said the “false mine of central banks” had been the only new source of gold supply this decade as they auction off reserves, but they are switching sides to become net buyers.

Barrick is moving fast to wind down the remaining 3m ounces of its infamous hedge book over the next twelve months, an implicit bet on rising gold prices over time.

Mr Regent said the company had waited too long to ditch the policy, which has made the company enemy number one among ‘gold bug’ enthusiasts. The hedges oblige Barrick to deliver part of its gold into futures contracts set long ago at levels far below today’s spot prices.

The strategy worked well in the falling market of the 1990s, but has cost the company dear in lost profits this decade. “Hindsight is always 20/20,” said Mr Regent, who was appointed from the outside earlier this year.

Barrick bit the bullet in the third quarter, taking a $5.7bn charge against earnings on hedge contracts. Liberation is at last in sight. In 2001 the hedge book topped 20m ounces.

Mr Regent said the hedge policy has weighed badly on the share price and irked investors, becoming a bone of contention at every meeting. The financial crisis brought matters to a head as markets fretted about counterparty risk. “It was clear to me that there were a significant number of institutions who wouldn’t invest in Barrick because of the hedge book,” he said.

Barrick produced 1.9m ounces of gold last quarter, down from 1.95m a year earlier. Costs have been “trending down” to $456 an ounce, though rising energy prices pose a fresh threat. Total reserves are 139m ounces, far ahead of rival Newmont Mining at 86m.

The hedge book venture has not been a happy one, but those who predicted that Barrick would eventually “blow up” on its contracts may owe the company