Questions are mounting about “Chinese gold” as the latest technological achievement that could potentially change the rules of the game in the global gold market, especially as Beijing’s creation of a new type of gold comes at a time of unprecedented rise in gold prices, exceeding the ceiling of four thousand dollars per ounce. Before announcing its innovation of “pure solid gold,” China surprised the world by producing huge quantities of synthetic diamonds in its laboratories. Gemstones that take millions of years to form in the depths of the earth can now be produced with similar purity, brilliance, and chemical composition in a matter of days, with China producing more than 20 million pieces a week in its advanced factories. This modern scientific progress has contributed to lower diamond prices, so will traditional gold prices be affected by “Chinese gold”? How will China use its technological superiority in the major confrontation with the United States of America? And what is the impact of this golden innovation on Lebanon, which has a large gold reserve in its central bank?
What is the new Chinese gold?
This innovative type of gold is not extracted from mines, but is made in advanced laboratories. It is 24-carat gold (99.9% purity) whose atomic composition has been modified by adding small amounts (0.1%-1%) of rare metals such as indium and zinc, to combine the purity of pure gold (24 carat) and the hardness of mixed gold (18 carat), making it four times more durable and scratch-resistant than traditional gold, according to what the expert in economics and financial markets, Dr. Imad Akkoush, told “Lebanon 24.” The new Chinese innovation helps produce jewelry with complex designs, lighter weight, and 10-20% lower prices, making it easier for the middle class to buy.
Impact on the price of traditional gold:
Akkoush rules out that the new Chinese gold will cause a decrease in the prices of gold extracted from mines in the near term, for several reasons, including the nature of the product as it is mainly directed to the jewelry market and not for investment or reserves, “as it is not a substitute for traditional gold in global stock exchanges or in the vaults of central banks.” This new type constitutes between 20% and 25% of gold jewelry sales in China. Its spread may attract new categories of consumers, especially young people who were refraining from buying gold due to its high prices or its unsuitability for daily use, which may expand the overall market instead of reducing the demand for traditional gold. In parallel, the investment value of this innovative gold is still questionable, as the product needs to gain the confidence of investors, global institutions, and major stock exchanges to be treated as an equal alternative to traditional gold, and this takes a long time.
No place for Chinese gold in central banks:
Central banks around the world continue to buy traditional gold in large quantities, as part of their strategy to reduce dependence on the US dollar and enhance the stability of their currency.
According to Akkoush, the Chinese innovation will not affect the trend of central banks to hold gold, because central banks buy gold as a safe asset and a hedge against inflation and currency fluctuations, not for jewelry making, and their basic standard lies in purity and density, such as standard ingots, not hardness or formability as is the case with Chinese gold. In the context, Akkoush pointed out that the Chinese central bank itself continues to increase its reserves of traditional gold, and has reached a record level, despite this innovation, which confirms that this innovation targets the industry and trade sector, while strategic reserves remain based on traditional gold.
Chinese gold, the Lebanese market, and the reserves of the Bank of Lebanon:
Before Chinese gold poses a real threat to traditional gold in global markets, it needs to build the confidence of investors, institutions, and investment funds. Despite its lower cost compared to traditional gold, Chinese gold has not yet found a place in local goldsmith shops, and its potential repercussions may be limited to the retail trade of jewelry, and not to the state’s strategic reserves, according to Akkoush, explaining that many Lebanese people accept 18-carat gold, as it is less expensive and allows for more beautiful formations. “From here, the new Chinese gold may be an attractive option for them, as it embodies the appearance of 24 carat and the strength of 18 carat at prices that may be more competitive. As for the level of reserves, it is unlikely that the gold reserve in the Bank of Lebanon will be affected, as the data show that the gold reserves in the central bank are pure ingots, and retain their high value as a strategic asset, and their value has reached approximately $38.6 billion. Central banks do not use this type of technologically treated gold in their reserves.”
In conclusion, “Chinese gold” is not expected to threaten the position of traditional gold in the near term, as the latter remains the safest asset in a volatile world dominated by monetary and geopolitical crises. However, the new Chinese innovation reflects a strategic shift in the use of technology to serve the economy, and reveals Beijing’s endeavor to expand its influence through scientific and industrial tools, instead of settling for traditional financial means. Although the actual impact will gradually appear in the jewelry and consumption sector, “Chinese gold” symbolizes a new stage of global economic competition, where technology is able to redefine value, even in the most stable and established commodities throughout history.
