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Chinese Silver Demand for Wealth Protection to Reach Record 7,700

Gold moved slightly upward on low volumes in Thursday’s session and the U.S. dollar capped gains following the Federal Reserve’s policy statement. Precious metals remained relatively unchanged in early Friday trading, having gained modestly to bring U.S. gold futures up $2.20 to $1,715.20 per troy ounce and U.S. silver futures up $0.137 to $32.235 per troy ounce.

The Federal Reserve’s policy statement on Wednesday consisted of a commitment to stick to its plan for stimulating U.S. growth until the job market improves, while acknowledging some parts of the economy have been looking a bit better. The statement reiterated the vow of the Fed to keep rates near zero until mid-2015.

Bloomberg is reporting that Chinese silver demand is prepared to grow nearly 10 percent next year as investors look to preserve wealth.

China boasts the world’s second largest economy, though it is considered by many to either be in an economic rut or to be facing some variety of slowdown. Investors in China are seeking as a valuable alternative investment and store of value. Silver gained 15 percent this year as ETF holdings of silver gained 6.5 percent. Research from Beijin Antaike reported 33 percent of the country’s demand for silver is attributed to silver jewelry and silver coins, with the rest being used in photography, solar panels, and electrical appliances.

According to Bloomberg, many producers and investors have hoarded the precious metal in the form of ingots or unwrought silver.

During the period of the first round of Quantitative Easing induced by the Federal Reserve, between December 2008 and March 2010, silver prices surged 53 percent, almost twice the gains in gold. The second round of Quantitative Easing, which ended in June of 2011, saw silver gain 24 percent.

Chinese national statistics indicate that silver jewelry sales gained 19.3 percent for the first eight months of the year compared with last year.

Yang Guohui, president at Hunan Yishui Rare & Precious Metals Recycling Co., said he is bullish on silver. He has stockpiled three tons of silver at home, a very large capacity by any measure and currently valued at over $1 million USD, according to a Xiamen report published on October 17. Yishui is based in Yongxing County, Hunan province, where about 20 percent of China’s silver is from.

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