Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
Traditionally, it has been the middle-aged and elderly who have preferred to include gold in their investment portfolios as a store of value, but over the past year, amidst economic uncertainty, China’s young people have become increasingly interested in gold products, fuelling a 12 per cent jump in overall gold purchases from January to October 2023.
In 2023, Chinese e-commerce platforms Tmall and Taobao revealed that the main consumers of gold jewellery were the ‘post-90s generation’. This group of young people, known as Generation Z, is creating a new gold rush – buying pea-sized gold beans weighing around one gram. The beans, which cost around 600 yuan ($83) each, can be stored in small glass jars and accumulated monthly or used as ornaments for fashion.
On China’s domestic social media platforms, many netizens who have purchased the “gold beans” have called them a “financial management tool” for young people, and there has even been a popular saying that “it is better to buy a gold bean than to buy a fund”.
Bloomberg interview found that compared with dozens of grams, hundreds of grams of gold bars, 1 gram of “gold beans” lowered the threshold for purchase, giving young people who want to invest in gold the opportunity to enter the field.
The phenomenon has occurred amid China’s economy being caught in the predicament of fighting deflationary pressure. Deflation refers to a decrease in the price level of goods and services, which means that each unit of currency can buy more goods and services than before; therefore, the supply of money and credit is also reduced. This may seem favourable, but it can lead to a reduction in consumer spending and investment as prices are expected to fall further.
The latest data from China’s National Bureau of Statistics (NBS) showed that consumer prices fell at the fastest annual rate in 15 years in January, with the consumer price index dropping 0.8 per cent year-on-year. This is the first time since 2009 that prices have fallen for four consecutive months, highlighting the serious challenges facing the world’s second largest economy.
Gold is widely recognized as a safe-haven asset that can hedge against market volatility and protect investors in times of inflation and deflation. However, while gold beans are an easy entry point to investing in gold, they may not be the most cost-effective way to do so.
Nikos Kavalis, managing director of Metals Focus, told Bloomberg that buying gold beans and other physical gold products doesn’t make sense because the premium increases. He believes that gold exchange-traded funds are a better option.
Those who want to stick with physical gold may want to consider gold bars and coins rather than gold beans, as the charges will be lower. Investing in “gold beans” has more of a recreational nature, and for young investors, following the trend of buying is more like a “sheep flock effect”, rather than the most sensible decision, and safe storage is also a problem.
