Gold is glittering for online financial products

Investors see precious metal as safe haven and hedge tool

Sellers of gold-backed financial products are expanding their online sales channels and attracting more investors to the precious metal as a hedge tool and asset safe haven, analysts say.

More than 20 internet-based service providers have launched gold-backed financial management products so far, including Tencent Holdings, which allows users to give digital red packets - or gifts - of assets backed by physical gold that can be bought and sold in real time.

According to Zeng Yan, an analyst at Guibao Precious Metal Investment Co, "The rising price of gold and its use as a hedge tool are the major reasons financial service providers are launching these products. They believe market fluctuations and investor sentiment are affected by uncertainties in the global economy. Going online is an effective way for gold to touch more investors, particularly young ones."

Also, in China the consumption of gold, and physical gold investments, are closely related. Investors would like to buy gold when prices rise, as they believe it's a signal that the precious metal is maintaining its value.

In 2016, the price of gold rose by 8.6 percent in US dollars -18 percent in yuan - the difference attributable to a change in the exchange rate. That's much higher than the average yield of wealth management products developed by banks (3.81 percent) and trusts (6.8 percent), according to data from Shanghai-based Wind Financial Information.

A report from the China Gold Association said in 2016 that investment demand for gold bullion rose 28.19 percent, and for coins by 36.8 percent.

A report from the World Gold Council in 2016 said, "A four-year high in investment drove price gains and demand growth."

Wang Lixin, general manager at the WGC's China operation, says, "Innovations and the development of the gold market have been constantly boosting demand."

For investors and users of online gold-backed financial management services, these new online channels help lower the threshold for physical gold investment. In traditional channels, such as banks or retailers, physical gold is sold most often in the form of bars or coins starting at 10 grams for more than 3,000 yuan ($437; 412 euros; 348), while digital channels enable investment starting from 1 gram, or even smaller portions.

Online gold-backed products also help raise investors' awareness of gold price trends and investment skills.

He Meixue, a 29-year-old graphic designer, says digitalized gold investments have changed her attitude toward gold. She received gold bracelets and necklaces as gifts from her grandparents, but she never cared about their intrinsic value and simply locked them away.

"I never regarded myself as a gold investor. My boyfriend gave me a digital gift of 5.2 g of gold on Valentine's Day, which was about 1,500 yuan - not a huge sum, but it aroused my curiosity about how prices change every minute. Now I check prices on my smartphone from time to time, and I have started learning about gold trading. I also realize that investing in gold does not guarantee good returns, because sometimes the price can fluctuate wildly. The experience gets me much closer to gold investment."

According to Xiao Lei, a researcher at G-banker.com, an online gold investment service provider, more financial institutions and internet-based technology companies are likely to introduce products and services benefiting gold investors in the future, making investment in the precious metals category easier.

wuyiyao@chinadaily.com.cn