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Selling Gold? Asia Will Buy

It is no secret that Asia loves gold, especially “ancient” civilizations such as China and India. The continent has thousands of years of history with the shiny yellow metal, and quite possibly thousands more to come.

So naturally it is not a huge surprise that reports of Asia “taking over” the gold market are becoming more and more frequent. Some might say that it is merely par for the course… others might say, “I told you so.”

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Prices on the London bullion market may be dropping, and Western investors may be selling, but that has not deterred Asian investors from buying more… no, more than likely, it has inspired them to stockpile at an ever increasing pace.

The financial emergence of Asia has brought with it an even more robust desire to own more of the metal, as well as creative new ways to buy and trade it.

We have witnessed exchanges set up in Hong Kong, Shanghai, and Singapore in the past couple years. And now, Bangkok also apparently wants in on the market-making fun.

Moreover, the advent of ATMs dispensing gold bullion, online gold accounts, and gold exchange traded funds (ETFs) have made the market even easier to access than ever before. It is as if an entirely new, highly efficient technological market has opened up for the metal that many in the paper money casino (modern financial) world like to call a relic.

Well, it has never looked brighter for this “relic” in Asia, even if its price in London has fallen 10% since March and is down by a third since the end of 2012.

The WSJ is reporting that the big three financial hubs in Asia are separately launching trading in new gold contracts, each backed with physical gold. If daily trading is successful, it could squeeze the 300 year price fix out of London’s hands and right into the lap of the Asian Tigers.

Rightfully so perhaps, since the market is basically driven by Asia anyway with China leading the pack as the world’s largest producer and consumer of gold, and the biggest importer, whereas domestic demand has outstripped its internal supply. Moreover, not to be outdone, India also is a 975-ton buyer of gold and a major importer in its own right.

The World Gold Council puts it all into perspective by reporting that two-thirds of global gold purchases come from Asia. Think about this. Not only does Asia buy the most gold, but the continent as a whole has the most foreign-currency reserves in the world.

With that in mind, there is no denying that the continent is swimming in wealth. Let’s just hope it is used constructively (rather than destructively) moving forward.