Dept of Precious Metals makes industry weep
The heavyweight winner of China's gold market must be the Industrial and Commercial Bank of China (ICBC). On September 9, 2009, the Department of Precious Metals Business of the ICBC was established, the first such department in a Chinese bank.
In only two years' time, the department filled many opponents with regret because of its exceptional performance.
This year up to August, the ICBC's transaction volume of precious metals reached 110,000 tons, five times that of the whole year in 2010, while the volume of precious metals business made a breakthrough of 1 trillion yuan ($154.6 billion), up 93% compared to the total in 2010. Currently the ICBC has more than 3.7 million accounts doing business in precious metals.
How long will it last?
Some observers say gold is on a white-knuckle ride as uninspiring policymakers limit upsides for stock markets. Though the price of gold has increased six times in the past decade, many people have never experienced a so-called bear market for gold in China.
A bull market for gold has appeared only twice in history. Once was in the 1970s, the other is happening now. Statistics show that the price of gold soared from $35 an ounce in 1968 to $850 an ounce in 1980, with average profitability of about 30%. However, the record high of $850 an ounce only lasted for one day on January 21, 1980. The next day it plunged to $300 an ounce.
According to Liu Shan'en, secretary-general of the Beijing Gold Economic Research Center, this bull market shares many things in common with the one back then. The current situation was caused by the U.S. dollar crisis and the larger impact of the global financial crisis, since gold functions for the purpose of guarding against credit risks.
Liu revealed that this time the U.S. dollar crisis is much more serious than the one in the 1970s, and the supremacy of the dollar is even more challenged today.
Many banks have come out with ten-year plans for making profit from the bullion market; commercial banks are making all efforts to grab this opportunity.
