The demand for gold in China, the third largest consumer in the world, lags behind that of India and the United States. This is due, in part, to the fact that citizens in China were not allowed to own gold in any form until 1982. Also, until 2007, only professional traders could buy and sell gold bullion. Before that, people had to buy it with investment funds or pay more for gold in jewelry and coins. In July 2007, the Shanghai Gold Exchange began nationwide individual gold bullion trading, a move that is anticipated to be a significant source of demand in the future.

Despite the fact that the exchange-traded 1,249 tons of gold in 2006, a 38 percent increase from the previous year, the new demand from individuals who will eventually be able to purchase bullion at prices that are more appealing may be a significant factor driving gold prices. The highest rate of savings in the world is achieved by the average Chinese worker, who saves more than 40% of their take-home pay. Perhaps the Chinese will begin accumulating gold more quickly than they have been doing so now that there is growing concern regarding the burst of real estate and skyrocketing Chinese stock markets.

16% of the approximately 4,000 tons of gold that miners, central banks, and scrap dealers sell annually is intended for investment demand. This is the gold that is melted down to make gold bars, a wide variety of coins and medals that are purchased by individual investors, various precious metals funds, and exchange-traded funds, a brand-new demand for investments.
For the first time, international investors can buy and sell gold bullion for their investment accounts through exchange-traded gold funds without having to store it.

Seven gold exchange-traded funds (ETFs) are currently trading on nine stock exchanges around the world, with the first one debuting in 2004 on the New York Stock Exchange.18 ETF securities are guaranteed to be backed by gold held in a vault on behalf of investors, and transaction costs are extremely low.

Gold ETFs had amassed 648 tons of gold by the end of 2006, so the ability to actually buy gold bars, not some gold fund invested at the whim of a portfolio manager at high account management fees, has been a significant driver of demand in just the last two years. Gold ETFs, like individual gold trading accounts that were recently authorized on the Shanghai Gold Exchange in China, are a brand-new source of demand for gold. Over the next two years, plans are in the works to launch them on a number of other exchanges, perhaps most notably in India