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 the year 2013 when the gold price plunged greatly, especially in April and October. Due to the unpredictability in the rising and falling global gold market, Chinese Dama’s blind investments in gold may be risky.^[1][2] The Wall Street Journal coined the term "dama",^[1] referring to this specific group of people who would often frenetically purchase gold or other items.

Background

From April 12, 2013, to April 15, 2013, the global gold price experienced a steep drop from $1550 per ounce to $1321 per ounce, down 23% to date.^[2] Later the supply and demand balance was broken; the gold was traded solidly higher, especially in China. On April 26, 2013, the gold futures price in COMEX in New York climbed 2.7%, quoted $1462 per ounce, their largest one-day percentage gain since 2013.^[2] A big factor behind the rise was a surge in demand for physical gold in China, some investors and analysts say.^[1][2][3][4] Because of the sharp drop of gold price, Chinese middle-aged women, who had spent 100 billion yuan in gold in April 2013, had purchased 300 tons of gold within 10 days.^[5] 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 deemed a bargain, sweeping jewelry stores across the nation, including Hong Kong, cleaning anything containing gold.^[1][6] Closely watched estimates from the World Gold Council were slated for release. Data released in May from the mining trade group showed, Chinese consumers bought 294.3 metric tons of gold in the first quarter, a 20% rise on the year.^[1] As a result, the gold price surprisingly held steady for a while.^[1][2][7] Because those who rushed to purchase gold were generally middle-aged Chinese women, whom in Mandarin are called “Dama”,^[1] the press hailed the Chinese Dama for defeating Wall Street, as the Chinese Dama had led to a rise in the price of gold, and because of this, the Goldman Sachs Group had to stop their short selling in gold.^[3][7][8] In November 2013, “Chinese Dama” gained their reputation in swallowing Bitcoin. Bitcoin is an online currency that can be exchanged into any real currency in the world.^[9] Bitcoin's value has surged 89 times since it was released. “Chinese Dama" made inroads into Bitcoins. According to a Chinese Bitcoin exchange website, 40 percent of their VIP clients who bought and sold more than 10 million RMB Bitcoins per day were “Chinese Dama”.^[2][8]

Features Of Chinese Dama

“Chinese Dama” generally represent a group of women that are deeply influenced by Chinese tradition, willing to serve within the household, and care about daily expenses in the developing society.^[6][10] Most of them had suffered from hunger, poverty and financial crisis,^[6] which made them feel insecure with paper currency which could devalue easily. In this case, tangible securities or fixed assets,^[8][10] such as gold and houses, are preferred. Therefore, when gold is cheap, Chinese Dama will invest in gold. When the real estate market abroad is in a recession, many go abroad and buy houses.^[8][11] 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 between April and June, when the metal price slumped.^[1][8] Most of them trusted their friends and neighbors over advertisements in magazines, which indicated that once one Chinese Dama had bought cheap gold, most of their acquaintances would buy cheap gold as well^[8]

Analysis of The Phenomenon

From the financial aspect, relatively cheap gold has retained its allure in China, especially when compared with other investment options, such as a stock market that remained well below highs of five years ago. "Gold is culturally accepted as a place to put your money in," says Axel Merk, who increased his fund's gold holdings in those months.^[1] From a cultural aspect, in traditional Chinese culture, gold represents the emperor or endless wealth, while collecting gold means collecting peace, luck and wealth.^[2][12] In specific regions of China, many Chinese still keep the tradition that gold jewelry is necessary in betrothal gifts and weddings or new-born birthdays; additionally, a majority of Chinese parents like to help their children prepare weddings and most of them have the need of storing gold for their children's future,^[2][3] Due to this traditional preference to gold for thousands of years,^[12] many Chinese Dama choose to invest in gold.

According to a monthly statement on Chinese online shopping in 2012, China's consumption comes mostly from people aged between 50 and 60,.^[5]

Many believe there are no other good investment options." Low-interest, a depressed stock market, macro-control on property and progressive inflation mean that the financial market starts to depress greatly, creating panic among citizens.^[5] Inn order to circumvent the risk of inflation and avoid loss in money management,^[2] the best form of wealth preservation in the traditional Chinese mind is to buy fixed assets at their lower price. In that case, gold is usually favored over cash in banks. However, the present system in mainland China is so narrow that it lacks a professional and long-term developing mechanism to manage private wealth.^[2] The voice of reform is necessary to build a trustworthy investment channel in order for people to obtain benefits of protecting and growing assets.

According to some analysts' point of view, compared with the rigorous analysis of Wall Street, Chinese Dama is simply a kind of bottom fishing -- their purchases cannot support the gold price in the long run, and the gold sellers turn out to be the direct beneficiary in the end.^[1][2]

Analysts' Points of View

"Without strong Chinese physical demand, gold prices would likely be trading at a much lower price now." Joyce Liu, an analyst with 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 LLC, which has $600 million under management.

"Chinese consumers' persistence is due to a traditional preference for gold as an investment." Liu Guangzhong, director for the Far East area 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^[13]

References List