Chinese Dama

Chinese Dama (Mandarin: 中國大媽/中国大妈, literally "Chinese Aunties") refers to a group of middle-aged Chinese women who rushed to purchase gold as an investment in 2013 when gold prices plunged, especially in April and October. Due to the unpredictability of the global gold market, Chinese Dama's blind investments in gold were risky.[1] The Wall Street Journal coined the word "dama"[1] for a group of people who frenetically purchased gold or other items.

Background

From April 12 to 15, 2013, the global gold price dropped from $1,550 to $1,321 per ounce. Gold was later traded substantially higher, especially in China. On April 26 gold futures on New York's COMEX climbed 2.7 percent, to $1,462 per ounce. A major factor behind the rise, according to some investors and analysts, was a surge in demand for gold in China.[1][2] Because of the sharp drop in gold prices, Chinese middle-aged women (who had spent ¥100 billion on gold in April 2013) purchased 300 tons of gold in 10 days.[3]

In April and May 2013, when the price of gold fell on the international market, many Chinese middle-aged women jumped at the chance for what they considered a bargain. They scoured jewelry stores across the nation (including Hong Kong), purchasing anything containing gold.[1][4] Closely watched estimates from the World Gold Council released in May indicated that Chinese consumers bought 294.3 metric tons of gold during the first quarter of 2013, a 20-percent annual increase.[1] As a result, gold prices held steady.[1][5] Because investors were generally middle-aged Chinese women, dama in Mandarin,[1] the press hailed the Chinese Dama for defeating Wall Street; they triggered an increase in the price of gold, ending Goldman Sachs Group's short selling of the metal.[2][5][6]

In November 2013 Chinese Dama began investing in bitcoins, an online currency. Bitcoin's value has increased 89 times since its introduction. According to a Chinese bitcoin-exchange website, 40 percent of their clients who bought and sold more than ¥10 million in bitcoins per day were Chinese Dama.[6]

Features

Chinese Dama are generally a group of women deeply influenced by Chinese tradition, willing to serve in the household and concerned about daily expenses in a developing society.[4] Most had experienced hunger, poverty and financial uncertainty,[4] which made them feel insecure with paper currency which could devalue; tangible securities or fixed assets,[6] such as gold and houses, are preferable. When gold is cheap, Chinese Dama will invest in it. When foreign real-estate markets are in recession, many buy houses abroad.[6][7]

Chinese Dama were pushed to the forefront in 2013, when thousands of Chinese women began buying record amounts of gold around the world.[1] They were the driving force in the global gold market from April to June, when the metal's price slumped.[1][6] Most trusted their friends and neighbors rather than magazine advertisements; if one Chinese Dama bought cheap gold, most of their acquaintances would do so as well.[6]

Analysis

Relatively cheap gold has retained its allure in China compared with other investment options, such as a stock market which had fallen. "Gold is culturally accepted as a place to put your money in", said Axel Merk, who increased his fund's gold holdings.[1] In traditional Chinese culture, gold represents wealth; collecting gold collects peace, luck and wealth. In some regions of China, many observe the tradition of giving gold jewelry as betrothal, wedding and baby gifts. Chinese parents help their children pay for a wedding, and most store gold for their children's future.[2] Due to this traditional preference to gold for thousands of years, many Chinese Dama choose to invest in gold.

According to a monthly 2012 statement on Chinese online shopping, Chinese consumption is highest among people aged 50 to 60[3] and many believe that there are no other investment options. Low interest rates, a depressed stock market, macro-control of property and progressive inflation creates public panic.[3] To circumvent the risk of inflation and avoid loss, the best form of wealth preservation in the traditional Chinese mind is to buy fixed assets at a low price and gold is usually favored over cash. However, the present system in China lacks a long-term development mechanism to manage private wealth.

According to some analysts, compared with Wall Street the Chinese Dama practice a kind of bottom fishing; their investment cannot support gold prices in the long run, and the gold sellers are the chief beneficiary.[1]

  • "Without strong Chinese physical demand, gold prices would likely be trading at a much lower price now." – Joyce Liu, analyst with the Singapore brokerage Phillip Futures
  • "More buying in China likely would act as a catalyst for gold prices, taken together with other drivers." – Axel Merk, chief investment officer at Merk Investments
  • "Chinese consumers' persistence is due to a traditional preference for gold as an investment." – Liu Guangzhong, Far East director of the World Gold Council
  • "Typically, Chinese investors buy gold when the price rises, and in the current gold price down when there is so strong demand, indicating that Chinese consumers for gold remain with plenty of long-term confidence in the performance of other investment products bleak further consolidated their this view." – Albert Cheng, World Gold Council Far East managing director[8]

References
  1. Yap, Chuin-Wei (12 August 2013). "China's Consumers Show Growing Influence in Gold Market--Country's Rising Appetite for Bling Boosts Market for Yellow Metal". Wall Street Journal. Retrieved 23 January 2014.
  2. "Did Chinese dama lose big on gold?". China Daily. 1 January 2014. Retrieved 25 January 2014.
  3. Expatree (10 May 2013). ""Chinese Dama" winner first round vs Powerhouse Goldman Sachs!". expatree. Retrieved 23 January 2014.
  4. Zhou, Raymond (29 November 2013). "Dama dames: China's secret weapon". China Daily Africa. Retrieved 23 January 2014.
  5. ""Wall Street Journal" create new words: "dama"". Financial News. 17 August 2013. Retrieved January 23, 2014.
  6. "Dama". China.org.cn. 27 December 2013. Retrieved 23 January 2014.
  7. Feng, Billie. "Dama: China's Secret Weapon". Sino-us.com. Archived from the original on 28 February 2014. Retrieved 6 March 2014.
  8. ""Wall Street Journal" create new words: "dama"". The Stock Market Watch. 17 August 2013. Retrieved 23 January 2014.
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