Gold bars are passé in China; the young are buying gold beans: What are they?

There’s a gold rush in China. But unlike the past where middle-aged Chinese were purchasing the gold metal, it’s the young who are now showing a growing appetite for this precious, yellow metal — albeit in bean form.

An increasing number of young Chinese are investing in ‘gold beans’ and a look at China’s Weibo, the equivalent of X in the Asian country, shows #goldbeans garnering over one million views and over 20,000 notes with topics ranging from collection strategy to store recommendations, and how to turn their collected beans into decorative accessories being the hottest searches.

But what are gold beans and why are Gen-Zs rushing to purchase them?

What are gold beans?

Usually when one buys gold for investment purposes, one either purchases a coin, or a biscuit, or even a brick. However, in China, a growing number of people are buying gold beans — pill-sized gold usually weighing just about one gram. These little pills of the precious yellow metal cost between 450 to 600 yuan (Rs 5,300-Rs 7,077) for a gram, making it accessible to the young generation, particularly those between the age of 25 and 35 years.

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How popular have gold beans become?

These pill-sized pieces of gold have gained a lot of popularity in China in recent times. The younger generation, namely the 25-year-olds to 35-year-olds, are opting for gold beans as their choice of investment, driving up the sales of the yellow metal in China.

In fact, between January and October 2023, gold sales in China increased 12 per cent, powered in no small part by younger consumers. Hong Kong jeweller Chow Tai Fook, even told Jing Daily that around 70 per cent of Chinese consumers aged 18 to 40 said they planned to buy pure gold jewellery over the course of the year.

Fred Qiu, a business-development manager for a jewellery brand in eastern China, also told the South China Morning Post that the younger crowd was flocking to buy gold beans. “Little one-gram beans of gold are particularly attractive to Gen Z customers, while young couples and middle-class women prefer gold bars — the 10-gram and 50-gram bars are especially popular.”

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And gold beans gained even more popularity during the Chinese New Year . A spokesperson for Chinese jeweller Luk Fook Holdings International told Bloomberg that buying gold beans for gifting and investments reached a peak at that period of time.

Even on social media, gold beans are the trending topic. ‘Why are young people getting into buying gold’ was burning up Weibo, with over 90 million hits. Additionally, Gen-Zers are also discussing how to use gold beans as decorative accessories on Weibo.

And such interest has led to sales of gold beans becoming a truly lucrative business with online merchants see a sale of over 10,000 units. In fact, even Chinese banks have joined in on the gold beans rush. For instance, China Merchants Bank, as per a report in Bloomberg, has begun selling gold beans since July 2023.

What’s driving the bean rush?

There are a number of factors why the young are gravitating towards these diminutive gold products. The primary reason for their popularity among the young is the affordability and accessibility.

Gold beans are available everywhere in China and the young view them as a good investment entry point. Twenty-year-old Zhong Yongxin told Sixth Tone that she was “swept up” in the gold beans frenzy. She said: “There’s an adage: ‘Gold is worn as jewellery when you’re rich and used as money when you’re poor.’ The gold I buy has two values. I can wear it daily or hold onto it, opting to trade or sell later.”

Gen-Z also said that they were able to purchase gold beans with a smaller amount of money, which helps at a time when China is struggling with its worst deflation levels. One of them speaking as to why they buy gold beans said that owning physical gold over other gold investment methods provides a unique “psychological satisfaction.”

A lack in other traditional investments such as property sales is also a reason behind the gold frenzy rush. Jacques Roizen, managing director of consulting at Digital Luxury Group in Shanghai, was quoted as telling Reuters, “Incomes are not really appreciating, real estate is not really appreciating, the stock market is not really appreciating. Gold is a little bit of a unicorn in this environment.”

The youth also perceive the return on gold to be much higher than other traditional investment options. For instance, at major Chinese banks, the interest rate is around 1.5 per cent to 1.8 per cent and has declined in recent months. Meanwhile, gold has yielded an annualised return of 5.8 per cent over the past three decades.

As 21-year-old Beijing student Nadia Qi, told Reuters, “The only thing I can trust and makes me feel relatively safe now is investing in gold. The deposit rate is way too low, and investing in the stock market is too risky.” In fact, Qi, who plans to buy at least 20 grams a year for rainy days told the news agency that she spends a minimal amount of her pocket money on daily necessities, rather shelling out more money on gold beans.

But are gold beans safer than other investments?

Buying gold beans isn’t without its own perils. Experts have noted that many of those buying gold beans are being duped with fakes. One of them was 26-year-old Shanghai office worker. She discovered that almost all the gold beans she had were mixed with iron, zinc and copper.

And Nikos Kavalis, managing director at the London-based consultancy Metals Focus Ltd has also warned people from buying gold beans. Speaking to Bloomberg, he said that it made no sense to invest in gold beans because their price is often 10 per cent to 30 per cent higher than the commodity’s spot price. Investors would be better served by parking money in gold exchange-traded funds, he said.

With inputs from agencies