(Xinhua)
Updated: 2008-01-19 10:58

The appeal of gold as an alternative investment is increasing in China as its price hits new highs and is forecast to keep rising in the mid to long term.

Related readings:  Gold futures trading debuts in Shanghai  Old frenzy missing as gold prices hit record Gold, platinum reach record levels

Stimulated by expectations of US interest rate cuts and soaring global oil prices, gold reached an all-time high earlier this month. Citibank estimated its price is expected to hit $1,000 an ounce this year.

The strong upward trend has attracted individual Chinese investors such as Yao Yun. The chief financial officer of a Shanghai-based foreign company bought 50,000 yuan ($6,849) in gold bars and the price has risen by 12 yuan per gram in just half a month.

"I believe the price will keep rising," he said. "The stock market is too volatile, and the real estate sector is subjected to macro-control.Investing in gold is a good choice at this time."

In Caishikou Department Store, a popular physical gold dealer in Beijing, more than 100 people lined up to purchase bullion for the Lunar Year of the Mouse on November 22, the first trading day of the products. More than 200 kilograms of the gold bars were sold within 1.5 hours. Moreover, the total subscription amounted to two tons.

Li Xiang, a manager of the department store, said sales of gold products surged more than 50 percent to 2.38 billion yuan in 2007.

Zhongjin Gold Cooperation Limited, a leading gold products manufacturer in the country, said its bullion sales had kept a steady growth of 50 percent month-on-month since July.

Paper claims to physical gold, which allows customers to use money in their bank accounts to virtually buy and sell gold at global prices, are also appealing to more domestic investors as well as speculators.

Recent figures from the Bank of China (BOC) Shanghai branch show that the transaction volume of "paper gold" reached 140 million yuan last week, 30 percent higher than in the flat period before gold started rising.

"Paper gold has entered the vision of more individual investors recently because of the wide range of price fluctuation," said Xu Ming, a gold analyst at the BOC Shanghai branch.

China Gold Association statistics revealed that gold investors nationwide have exceeded 1 million. The number doesn't include speculators of gold futures, which made a strong debut in Shanghai on January 9.

On that day, China gold futures contracts surged to the daily 10 percent limit minutes after trading started at 9 a.m. on the Shanghai Futures Exchange. More than 6,000 clients traded on the market.

Experts believe the China gold futures market will grow into a leading global market as it was launched at a time when international gold prices have repeatedly been hitting new highs. Global prices jumped more than 30 percent throughout last year, representing the biggest increase since 1979.