Small investors stuck after China gold rush

Although gold prices saw a slight recovery in this July, small investors are left with little options when looking to unload purchases made during the gold-buying spree earlier this year, as prices remain low and dealers reluctant to shell out cash, the People's Daily reported on August 2.

While spot price for gold rose 7.3 percent to $1,313 an ounce on the last trading day of July, prices remain 22 percent lower than when the market plunged in April and triggered a buying frenzy nationwide, according to the Xinhua News Agency.

Small investors throughout China now find themselves stuck with depreciated gold assets as vendors tighten their purse strings, many of which are conducting trade-only deals.

A woman surnamed Liu was shocked to discover at the gold beads she had purchased for 390 yuan ($63.61) a gram at a Hong Kong market back in April were now only worth 264 yuan a gram at Beijing's Caishikou Department Store on July 24, reported the People's Daily.

Pawn shops are taking advantage of the post-gold rush period by offering rock bottom prices. For example, a man surnamed Wang found he would have lost 77 yuan a gram if he had hocked his 30-gram gold necklace at the Beijing Huaxia Pawnshop, said the paper.

Qian Haiyan, associate professor at Nanjing University's School of Business, suggests small investors should carefully research what repurchase channels and policies are available, as well as encouraged those thinking of investing to see gold as a long-term investment.

"It's absolutely irrational for people to rush to buy when prices are up and eager to cash in at every market downturn," Qian told the People's Daily.

Zhang Bingnan, vice president of the China Gold Association, explained that small investor gold purchases may be a good way for China to acquire larger gold reserves.

"China still lags behind in terms of gold reserves, which is over 11 percent lower than the world average," Zhang told the People's Daily, who advised investors not to be lured into another gold-selling rush.