Why China Is the Secret to the Next Leg of the Gold Boom

I suffer from Big Family Syndrome.

No, that's not an actual scientific term. It might even be the first time you've heard these three words spoken together.

But I assure you, it's something that most Asian Baby Boomers and Gen Xers (like myself) can relate to.

I grew up with a huge extended family. And by huge, I'm talking about enough aunts, uncles, cousins, nephews, and nieces to fill a town hall.

My father had 14 siblings while my mom had nine. All but four married and went on to have kids of their own. Just remembering the names of each of my aunts and uncles was a challenge when I was growing up. It made every family gathering feel like a midterm exam.

I even had a few first cousins whom I didn't call by their actual names until I was engaged to be married.

Surprisingly, my Big Family Syndrome came in handy in my investing career – and not because of connections.

Instead, it gave me incredible insight into something you wouldn't expect... the gold market.

Let me explain...

As one of the youngest in my generation of Tycangcos, I got to see many of my older cousins grow into adulthood and get married way ahead of me.

In Chinese culture, it's customary for grooms- and brides-to-be to always have family members play different parts in the entourage. So, long before I got married, I had already walked down the church aisle at least a dozen times... the first few times as a ring bearer, then as a groomsman later on.

I've lost count of how many Chinese weddings I've attended over the years. But there's one thing I could never forget about them... how much gold there was.

Indeed, a Chinese wedding without gold is like a bar mitzvah without a party and envelopes of cash. It just doesn't happen.

That's because it's a long-held tradition for grooms to present their parents-in-law with gifts of gold. It's a kind of dowry that signifies welcoming a new member into the groom's family.

A typical gift involves four sets of gold jewelry: a pair of earrings, a necklace, bracelets, and a ring (usually with a diamond). But usually, people don't stop there – they like to go over the top.

One of my wealthier cousins didn't bother using a table to display his gifts. Instead, he turned one of the bedrooms in his in-laws' house into a de facto gold vault.

I remember seeing two thick gold bracelets in the shape of a dragon, a gold coin pendant as big as a baseball, and matching "his and hers" gold Rolex wristwatches.

Lately, these gift-giving ceremonies held before the wedding – which function as official engagements – have become more and more like showcases of wealth. That's especially true in China, where close to 10 million couples get married every year.

This army of gold-buyers has almost single-handedly turned China into the world's largest gold-consuming nation.

The COVID-19 crisis threw a wrench in the works, though. Getting married at a time when you can't even have large gatherings – something synonymous with Chinese weddings – is a total deal-breaker.

By April, more than 10,000 weddings had been postponed in Sichuan province. In Guizhou province's Zunyi City, about 1,000 weddings were postponed earlier in the year. Both these areas are hundreds of miles from the epicenter of the outbreak in Wuhan.

It's no surprise that demand for gold jewelry in China fell as a result.

In the first quarter of 2020, demand fell 65% year over year. The next quarter, even as the country emerged from lockdown, gold jewelry demand was down 33% year over year.

Here's the crazy part, though... Gold prices soared to all-time highs even as Chinese demand fell.

As I'll share tomorrow, things are nearly back to normal in China. That means gold demand should rocket higher. And it'll likely cause the next leg higher for gold.

Good investing,

Brian Tycangco

P.S. This tailwind for gold isn't the only trend that China and other emerging markets are driving today. In fact, several industries are benefiting as countries across Asia see spectacular growth. And from what I've seen in this part of the world, investing in the right stocks now could help you make quadruple-digit returns over the next few years.

As a special favor, we've brought back my latest presentation to make sure you get a chance to learn the details. Take a look now before it goes offline.

Further Reading

"China's newfound wealth changed the world in ways we previously thought unimaginable," Brian writes. The country's middle class has grown incredibly fast. But now this rapid increase in economic prosperity is spreading beyond China... Get the full story here.

Gold demand in China has taken a hit from the COVID-19 crisis. When it recovers, though, we could see a huge rebound. And the same is true in another industry – one that's part of a major boom throughout Asia... Learn more here.

Market Notes
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