Gold loses sheen, but still a safe bet

Sun Taoxian, a 45-year-old physician in Shanghai, said she puts about 10 percent of her savings in gold bars. She rents a safety deposit box to store them.

Sun said she is one of many middle-class investors who have tried a large variety of wealth management products since the early 1990s — trading in the stock market, buying and selling foreign exchange, investing in trusts and funds, but she has found gold is the most stable and "safe".

Over the past decade, people have been eyeing high-yield products and hoping to become rich overnight, seeing assets doubling or tripling in a couple of months through speculation on the stock market or gaining a 20 percent yield in trading foreign exchange, but after all these years, investors are getting smart and mature and want slower but safer returns, said Sun.

"If you look at the return on gold investment over a 10-year-term, you'll find that it's actually very good, double that of many fixed-income products," said Sun.

Xue, the analyst with Jinhengfeng, said one reason for the falling price of gold in the global market is the shift of funds from the precious metal to the recovering stock market in the US and reduced concerns about the economic situation as the macro picture improves.

The hedging value of gold may be weakened in the short term but its long-term value for hedging risk is inherent, said Xue.

Continued innovation in the range of gold investment products available across a range of countries including gold accumulation plans in China confirms the healthy appetite for gold among investors, said Yang Yijun, chief analyst with Wellxin.com, a precious metals consultancy.

Gold exchange-traded funds, likely to be introduced this year, could further push up demand for gold reserves in China, said Yang.

Although currently there is no official timetable for gold exchange-traded funds in China, authorities have been making efforts to bring the gold investment market closer to the global gold market.

Yang Fei, an analyst at Seewonder Financial in Shanghai, said investors are also increasingly interested in gold-backed financial derivatives.

"It takes more experience, knowledge and guts to deal in gold-backed funds and, interestingly, more investors are working hard to expand their vision for investment in gold," said Yang.