World Gold Council Planning Huge Sales Push In Rural China

Council Hoping Government Stimulus Measures Will Spur Consumption In Notoriously Frugal Rural Areas

China is one of the world's top gold markets, owing to its growing middle-class consumption and reliance on gold as a traditional hedge

Shanghai Daily reports today that the World Gold Council has started a major sales drive in rural China, banking on indications that the country’s second- and third-tier cities have more sales potential than their first-tier counterparts in terms of gold consumption. This sales push follows similar drives by antiques, visual arts, shopping center and luxury car companies to attract customers in China’s interior — where any semblance of “luxury fatigue” has yet to sink in and the middle class is seeing gradual growth.

As one of China’s traditional hedges, the World Gold Council is banking on gold’s allure to buyers in remote areas both for its value as well as its cultural resonance.

“Rural areas showed better-than-expected demand for gold in the first half in China,” said Gerry Chen, business development manager China of World Gold Council.

China is the only country in the world where gold jewelry demand has risen in the aftermath of the world financial crisis, the council said. Sales in China’s mainland rose 9 percent in the first half, while global demand contracted 8 percent.

China Now World’s Fastest-Growing Diamond Market

Country Should Overtake Japan As Second Largest Diamond Market By Sales Volume Within The Year

Diamonds are a "must have" for China's growing luxury consumer class

Falling demand for luxury products of all shades has vaulted China to the top of many lists this year, as demand in developed markets has fallen for everything from luxury cars to five-star hotels. With China’s massive population and growing middle class, even gradual growth in demand can mean a great deal for luxury brands, so diamond producers can continue to be optimistic about the potential for their products in China — soon to be the world’s second largest diamond market by sales, if the projections of Freddy Hanard, chief executive officer of the Antwerp World Diamond Centre, are correct.

As the Financial Times writes today, Hanard predicts that diamond sales in China should continue the double-digit growth they saw in the first half of the year to continue throughout the second, and says that sales could possibly double in 2010. As the thirst for luxury products continues to spread in China’s second- and third-tier cities, and wealthier Chinese maintain their desire to diversify luxury and high-value holdings — something that we have seen in recent years as they’ve increasingly purchased luxury cars, gold, rare watches and jewelry, fine wine, contemporary art from China and elsewhere, and real estate — diamonds will probably remain strongly in demand according to all indications.

“China is the world’s fastest growing diamond market. And it can go very fast. It is still discovering diamonds,” said Mr Hanard.

The Global Yuan: What It Means For Chinese Assets

China’s Monetary Policies Look To Favor Yuan, Gold At Dollar’s Expense: What Will This Mean For Art Collectors & Investors In “Portable China”?

Art Collectors and other holders of "Portable China" can benefit from the globalization of the yuan if they're in it for the medium- to long term

Today, Business Intelligence looks into China’s monetary policies, and how they are increasingly favoring alternate investment vehicles like gold while putting a dent in the US dollar. For investors looking to diversify their holdings into a number of areas to lower risk and exposure to market fluctuations, what will the simultaneous increase in asset diversification, global economic jitters, the ascendance of China and internationalization of its currency have on those who put their money into Chinese assets? The article does a fairly good job of illustrating the long-term effects these market forces will have on these investors as well as China itself:

In a series of recent policy moves and announcements through official channels, or increasingly through indirect ‘economic ambassador’ addressing conferences or talking to western reporters, China’s intentions and ambitions are becoming clearer.

Chinese Jewelry Brands: Three To Watch

Strong Demand And Growth In Chinese, East Asian Markets Helps Luxury Jewelry Brands Find New Global Markets

Gold has been a traditional "hedge" in China for centuries

We have written before about the popularity of gold, jewelry and watches in China, and as the figures released today show that the Chinese economy seems to have positive momentum, it is likely that domestic demand will continue to grow for these luxury items. Government efforts to spur increased consumption and lower savings rates look to be at least partially successful, and as a result many global jewelry companies are now putting extra effort into their China outreach and expansion programs.

Today, Diamond Worldlooks into the growing influence of Asian jewelry brands as they become an increasing part of the global market, profiling three up-and-coming Asian jewelers who you might see at a mall near you in a few years: Luk Fook Jewelry, Kin Hung Lee Jewelry and Qeelin Jewelry.

Wealthy Chinese In 2020 — Luxury Watch Lovers, Art Collectors, Wine Aficionados

Breakneck Development Of Luxury And Cultural Sectors In Last 20 Years Indicates That Chinese Luxury Consumers Will Be A Huge Global Force For Foreseeable Future

By 2020, China will be a global financial powerhouse -- but what will luxury consumers be buying by then, once they've made their first "big" purchases?

Over the last few weeks, as the ongoing global economic woes further put China, and its relative insulation from the worldwide crisis, in the spotlight as a luxury and business “success story” we have seen a much stronger focus on the Chinese consumer. Observers look to Chinese consumption as one of the keys to a faster global recovery, and luxury watchers see news like store openings in China, auction results, and even stories of wealthy Chinese tossing their wealth around freely as signs that the Chinese upper-middle and upper class are spending again. Today, an article in Wealth Bulletin hints that luxury executives who are worried that the Chinese market is not solid enough to invest their full faith into that consumer class can breathe a tentative sigh, as they cite the Julius Baer Luxury Brands Fund’s 27% rise in Euro terms, versus a 17% rise in the MSCI World:

Julius Baer said in a report today it predicts profit margins will remain in double digit territory for many luxury companies, despite the global economic slowdown.

These bullish findings indicate that the global wealthy are still buying luxury goods, which is, in some ways, unsurprising — but this has to be qualified by looking into how these numbers have risen. Although the Julius Baer index notes a rise, it does not break down the demographics of who is buying high-priced luxury goods. Based on other data, it seems that the influence of emerging wealthy consumers from places like China and, to a lesser extent, the Middle East and India, who are bolstering the luxury market.

Art Is Good As Gold In Inflation Era — Bloomberg

Fund Managers Moving Towards Art As Investment Diversifier, Will These Managers Balance Their Art Portfolio Investments With A Global Mix?

Castlestone is investing in western artists like De Kooning. By focusing only on western art, is the fund going to miss out on higher returns later?

We have written before on Castlestone Management, a $660 million investment fund that focuses on works of art, which the fund feels is a better investment over the long term than traditional hedges like gold or other hard assets. Today, Bloomberg has an excellent profile of the fund, noting that it is designed to benefit from one of art’s great features — a resistance to the great asset de-valuer: inflation. Castlestone, and art investment funds like it are , Farah Nayeri writes, “designed as an anti-inflation shelter at a time when recession-busting stimulus packages are flooding the global economy with cash.” So with the number of these funds increasing, as investors look for inflation-defying destinations for their money, will they get with the program and look for a more global mix, made up of Chinese, Indian, and other emerging artists? Or will they stick to their Picassos and Warhols?

It looks like Castlestone may be up for anything as time goes on, but at the moment they seem to be a bit top-heavy with artists who are late in their career. However, with this sort of fund growing and becoming more popular with inflation-weary investors who aren’t up for the rollercoaster ride of investing in gold, stocks, or jewels, an art fund might be just the thing.

DeBeers Wooing Safe-Haven Investors – FT

Stock Fluctuations Lead Investors To Continue Searching For Diversity: Gold, Diamonds, Art, And Wine

Diamond and gold producers and contemporary art and wine auction houses are increasingly targeting Chinese investors and sovereign wealth funds

Today’s Financial Times has a feature on investors who are turning to traditional hedges against stock market turbulence, and the way major diamond producers like DeBeers are ratcheting up their marketing and outreach efforts to get these people’s attention. Although diamonds fell mainly out of favor in recent years in many developed countries due to their sometimes controversial nature, diamond consortia have seen their fortunes turn around rapidly as they increased their foothold in emerging markets like Russia and China.

The Power Of Jewelry In The Chinese Market

Buying Trends Indicate Wealthy Chinese Looking For Long-Term Value, Asset Classes That Outpace Inflation

China is a huge and growing market for Sotheby's and other auction houses

JCK looks back at the recent Sotheby’s jewelry auction that took place in Hong Kong, reflecting that the runaway success of luxury goods classes like jewelry/diamonds at that auction shows that Chinese buyers — who were the overwhelming majority in this instance — are continuing to invest in assets that will hold sustainable value. Seeing how these same buyers were more interested in diamonds than Chinese jadeite — which does not have as sophisticated resale markets — it seems pretty obvious that wealthy Mainland Chinese are supplanting the historical role of Hong Kong Chinese as mass buyers of luxury asset classes. This carries over in all classes, recently, from fine wines and watches to automobiles and contemporary Chinese artwork.