LBMA Conference in China 2019: Gold in the Chinese Pension System
Tags: Gold, Shenzhen, Conference, Cryptocurrency, China

The 5-th largest city in Pacific Asia Shenzhen hosted the most significant annual conference for the global gold industry. The London Bullion Market Association (LBMA) conference lastly held in Boston in 2018, moved to Shenzhen, China on October 2019. This large market was once more paying homage to the East Asia country’s position as the world’s largest gold producer.

The LBMA’s role is to oversee the precious metal’s over-the-counter bullion trade. In their announcement of the Shenzhen conference, their board said that it recognized China’s principal role in the gold market. To that effect, the LBMA has just added Bank of China’s Wenjian Fang to its board.

This is the third time the LBMA conference is in China 2019. It also means China has hosted the event more than any country in the LBMA’s 20-year history. The annual conference brought to Shenzhen the gold market’s global supply chain. It included refiners, miners, jewelers, retailers, chip makers, and all other market players in between.

The LBMA, however, is not the only global gold market player with their eyes focused on China.

China’s Growing Influence of The Gold Market

Since the inception of the Shanghai Gold Exchange (SGE), China has taken its rightful place alongside London and New York as a leader in the physical gold exchange trade. Most international investors have been making pathways to the SGE. Established by the People’s Bank of China in 2012, the SGE is the country’s official gold platform, channeling all the gold mined and recycled in China.

The SGE continues to contribute to China’s growing influence over the gold market trade. SGE is the largest physical gold exchange in the world. To enhance the SGE’s dominance, China has implemented policies as zero VAT on gold purchases. The government has also added gold contracts to the exchange, including the International Board and Shanghai Gold contracts.

Besides its position as the world’s largest gold producer, China is also the largest gold importer globally. The country mines a significant 11.5 percent of the world’s annual gold output, mining over 404.1 tons in 2018 alone. This amount is, however, not enough for the insatiable demand for gold in the country. In 2018, for instance, over 687 tons of gold was used on jewelry alone.

Chinese Demand for Gold Falling In 2019

Investors, on the other hand, purchased over 308 tons of precious metals, buying up 28.6% of the gold in 2018. The country’s central bank has also been stocking up on its gold reserves. Data from the World Gold Council shows that China has the 7thlargest gold reserves after Russia and France.

Gold has an ancient and deep cultural significance in Chinese culture, and its demand has been on the rise for the last decade. A good combination of changing central bank policies, growing economic uncertainties and rising levels of wealth have increased gold sales for jewelry, and industry. Retail investors also purchased over 10.7 million ounces of the precious metal in 2018 in coins and gold bar forms. Investors have been buying gold as a hedge against falling renminbi values, following the US-China trade war.

The demand for gold in the East Asia nation has, however, fallen in 2019, as the escalating tensions between the country and the US bite into the country’s economic growth. China’s GDP has significantly been affected by the trade tariffs imposed by the US, negatively affecting the people’s gold purchase power.

The rally in prices of the precious metals has also kept many investors away as the prices hit record highs. Fortunately, the decreased demand for gold China has been offset by global investors in gold who can’t seem to get enough of the safe-haven asset. A lot of gold is, therefore, being absorbed by gold ETFs and increased central bank buying.

Gold in Chinese Pension System?

The slowed momentum in Chinese gold sales could be a thing of the past if China adopts the precious metal into its pension system. During the LBMA conference in China 2019, the Innovation Panel at the meeting put forward gold as a possible solution to the escalating Chinese social security system problem.

The country is facing growing strain as its once large working population rapidly ages and shrinks the workforce. According to the China Academy of Social Sciences, China’s pension fund could go bankrupt by 2035.

Because of the country’s past one-child policy, there now remains a dwindling workforce, which cannot support its numerous older citizens. Data shows that Chinese citizens aged 60 and above make up over 18% of its population.

China has, however, vowed that it will fully guarantee its pension payments and is incorporating “positive, comprehensive and scientific measures” to its war chest. Both employees and their employers contribute to the pension system, with employees putting in 8% of their salaries. Employers, on the other hand, have been contributing 20% of their employee’s salaries, but that value has been cut back to 16% to reduce the growing cost burden for businesses.

Gold as A Secure Retirement Investment in Chinese Pension System

To boost the fund, the Chinese government has transferred equity stakes in large state-owned enterprises worth billions of yuan to the pension fund. Unlike stocks whose values are profoundly affected by central bank policies, gold is not. The proposal to have gold incorporated into the pension fund could, therefore, push the demand for gold in China once more through the roof.

The innovation Panel’s experts at the LBMA conference in China 2019 estimate that this move could push the precious metal’s demand from 4.5 to 10 tons each year. This could especially be true, as younger Chinese citizens, who have less trust in the government than their parents, push for better retirement fund investment channels.

China’s younger citizens are taking up gold investments to hedge risks across their savings. Most advisors and asset managers advocate for a level of exposure in precious metals for investment portfolios.

People can purchase most other investment assets quite easily through the aid of technology. If you, however, want to buy some gold for your portfolio, you will find a very traditional over-the-counter market system. This makes very it hard to verify not just the quality, but the ownership and the quantity of gold purchased. The hoops that new investors in the gold market have to jump through to buy high-quality gold can dampen the spirits of passionate investors.

Buy Gold with Novem Gold

So, at Novem Gold we have designed a flexible, blockchain technology supported gold purchase process. We shall generate NEO blockchain-based NNN coins, fully backed by 100% LBMA certified gold. Our utility token, the NVM, is on sale. From its proceeds, we are planning to open over 100 gold stores across major cities in Europe. These stores will allow gold investors to bring in their physical gold onboard the Novem Gold secure ecosystem. We opened our first store on Landstraße 1, 4020 Linz, Austria.

We are also awaiting regulators to give us the go-ahead for the sale of our NNN token. The NNN stable coin is a tokenized gold asset, which makes it much easier for an investor to buy gold. With NNN, you do not have to worry about your gold investment’s insurance or storage costs. Gold that backs the NNN is securely stored at high-security storage facilities at Trisuna Lagerhaus OZL in Triesen, Liechtenstein.

Any NNN holder can redeem their stable coins for physical gold at their convenience. We perform regular audits on gold assets for transparency and have partnered with Grant Thornton for audit quality assurance services.

To learn more about Novem, visit: https://novemgold.com

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