Interview – China’s economic recovery not yet reflected in gold consumption

In the third part of his interview with Ed Moy, former director of the US Mint and currently the chief strategist for US fractional gold retailer Valaurum, tells Biman Mukherji how he believes that China’s economy may not have picked up as much as being projected because that is not yet reflected in gold consumption.

However, he does believe that both China and India’s gold consumption will pick up in coming months as their economies recover from the pandemic, and says that the use of gold as currency is set to increase as confidence in fiat currencies like the dollar has been shaken by the pandemic.

Q: How has gold’s use as a currency picked up during the pandemic

The short answer to that question is that while there has been growth in that area that growth compared to all other investments has been really really small.

So, I think there will be continued interest in this area and it ends up being a pressure valve that gives people who fear what might happen to fiat currencies. — like the US dollar — it gives those people an outlet.

There is no mass of people to make this really impactful in the overall economy but nevertheless its a small niche area that is growing rapidly. There are states in the United States that have exercised their constitutional rights to make gold a currency in their own state. Utah is one of them.

It has basically said that anyone who wants to use gold can settle to buy their groceries. As long as the buyer and the grocer both agree, they can use gold as a currency. Now Texas is also considering that.

Those are indicators that there are people who are concerned over the management of the country’s currencies and they want other alternatives. I think the interest in crypto currencies is also an indicator of that. I think you are seeing that in India these days where there is lot more interest in things like bitcoins — mainly as a speculative asset, but in some instances they also that for exchange of goods. 

Q: What are the trends in central bank gold purchases?

For a while central bank buying has flattened out. Central banks were still buying, but in smaller amounts. But what is really unusual is that some of the countries were actually selling some of their gold reserves and that is because the pandemic has caused budget issues and one of the easiest ways for them to get enough liquidity that is not tax based is to sell some of their reserves.

So you saw some of those cash-strapped countries sell some of their gold reserves and that offset whatever small purchases that were happening on the central bank side. I do think there are countries like China who are very interested in increasing their central bank gold reserves.

They will start buying now that it seems the numbers that they are reporting  — it is hard to tell whether those numbers are real or not — but it appears that their economy has started to recover and as a result will  be adding to their gold reserves. And China was one of the largest central bank purchasers over the last decade.

Q: What are the trends you are seeing in Asian physical gold consumption?

China and India are the largest drivers behind physical gold consumption. And so as China’s and India’s economies start to recover I believe that gold consumption will reflect that.

And that is one of the reasons I question China’s numbers right now because China says that its economy is growing better than the rest of the economies but their gold consumption purchases have not risen at the same rate as they say their economy has.

You know past year (since) Diwali there has definitely been an increase in gold sales, but definitely not even close compared to normal gold purchases by India during that holiday season.

There are no buying occasions immediately (in the first half of this year) and they do contribute a lot to percentage of gold purchases but gold is still bought all year round. And as more people — because of India’s great economy — enter the middle class, there is a desire among those people to have gold as an alternate store of value which is very important to Indian and Asians in general.

Number two, as you reach the middle class you want to show everybody that you have reached the middle class and you want to wear that gold jewellery to basically signal that you have arrived. Those factors mean that gold consumption sales happen all year around. They just happen to peak around those buying occasions. And so as India’s economy continues to recover you will see increased purchases of gold jewellery.

Biman Mukherji is a columnist and consulting editor at He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at

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