Buying gold in this particular form is currently all the rage in…where else? – China.

China and India are two countries whose central banks have been insatiably buying up gold for more than a decade now. They’re also two countries whose citizens have the most voracious appetite for buying gold in any and every imaginable form possible. It should be no surprise then that they’re also countries that have created some of the unique ways to invest in gold. For example, India offers investors the option to purchase Sovereign Gold Bonds (SGB). These bonds, which are issued against grams of gold by the Reserve Bank of India, India’s central bank, have a maturity period of eight years. Investors can redeem them early after the fifth year – or sell their bonds in the secondary market at any time.

But we’re not visiting India today – we’re headed to China. So, what’s this new form of gold that’s found particular widespread popularity with China’s “Gen Z” young people? – Gold beans. Yes, you read that right: beans.

Let’s take a look at what gold beans are and the buying craze they’ve generated in China, especially with Chinese youth. I’ll also note the primary advantages and disadvantages of investing in gold beans.

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What are Gold Beans?

Gold beans are essentially a form of gold jewelry, although they don’t appear to be very commonly worn. Some gold bean buyers do purchase them in the form of a pendant to be attached to a necklace or bracelet, but the majority of them are more likely to just collect and save them in a jar or something. Alternatively, individuals may choose to festively display a collection of them on a plate, as shown in the photo below.

Gold beans are more or less simply a lump of gold, approximately one gram in weight. Their sudden surge in popularity has been a windfall for Chinese jewelry stores and other merchants that sell gold. Some retailers report selling in excess of 10,000 beans per month. Gold beans have become such a hugely popular purchase that even Chinese banks have gotten into the market. This past summer saw the China Merchants Bank start offering its own exclusive line of gold beans for sale.

Here’s a more close-up view of some gold beans:

A lot of Chinese young people set up a regular gold bean investment schedule, buying one or more beans every month, depending on how many they can afford to purchase. Some proudly show off their collection on their social media accounts.

Why Gold Beans are Such a Popular Investment

One of the primary draws for investing in gold beans is the fact that, at only one gram in weight, they’re a relatively inexpensive way to start investing in gold. Even with gold’s recent substantial increase in price, a gold bean typically costs less than $100. That puts it within easy reach of most working young adults in China, and makes it a viable choice for a regular monthly gold investment plan. Thus, gold beans have become a popular entry-level gold investment for beginning investors.

The hunger for gold beans is just part of the overall strong demand for gold, including gold jewelry, gold bullion, gold coins, and “gold-anything-else” that has long been characteristic of the Chinese. China’s populace, as a whole, and much like its government, is a firm believer in the long-term value of gold. Therefore, they are also firm believers in the idea that the gold beans that they buy today will be worth more tomorrow.

A 2021 report from the World Gold Council (WGC) estimated that younger investors – individuals between 25 and 35 years old – accounted for approximately 75% of gold purchases made by individual investors in China. This hefty appetite for buying precious metals among the younger generation has helped to make gold and silver sales one of China’s fastest-growing consumer markets. It’s estimated that more than one-third of the nearly 80,000 jewelry-related business ventures that exist in China were created within just the past five years. An encouraging note for gold merchants in China comes from the WGC’s estimate that more than 700 million of China’s people are under the age of 40, and that the younger segment of the population – those under 25 - is expected to continue growing. 

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Possible Disadvantages of Buying Gold Beans

While gold beans are undeniably a popular gold investment, they’re not necessarily the best bargain for gold investors. The typical markup over gold’s spot price on gold beans runs anywhere from 10% all the way up to a rather hefty 30%. However, the confidence the majority of Chinese citizens have that gold prices will continue increasing substantially leads many of them to brush off most concerns about having to pay sizeable premiums over spot for their gold beans.

One other caution for bean buyers: watch out for fake gold. Some individuals have reported buying some gold beans, only to find out that when they went to sell them, rather than being pure gold, their beans were discovered to be a mixture of gold, iron, zinc, and copper.

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A New, Unusual Form of Physical Gold - Summary

There are constantly new and interesting ways to invest in gold being created. Gold beans are one of the latest innovations in physical gold, joining other relatively new forms of physical gold, such as Goldbacks – thin sheets of pure gold that are shaped like regular currency notes. Thanks to their small, one-gram size, gold beans have caught on big-time with the younger Chinese population as an easy way for beginner investors to start acquiring gold.

• J.B. Maverick

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Sources:

https://www.japantimes.co.jp/business/2024/03/16/gold-beans-china-deflation/

https://daoinsights.com/news/why-do-young-chinese-delight-in-collecting-gold-beans/

https://www.firstpost.com/explainers/gold-beans-china-young-genz-economic-condition-investments-13750184.html

https://www.ndtv.com/world-news/chinas-gen-z-consumers-are-increasingly-investing-in-gold-beans-what-are-these-5255006

https://www.straitstimes.com/asia/east-asia/gold-beans-all-the-rage-with-china-s-gen-z-as-deflation-bites

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