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Group-buying sites entering gold market

(China Daily)

10:16, October 08, 2011

SHANGHAI - The gold bugs who are now flocking to special websites to buy the glittering metal at supposedly discount prices may be subjecting themselves to risks, warn investment advisers and lawyers.

In the past few months, the price of gold has increased in both domestic and international markets, going from 300 yuan ($47) a gram in March to about 340 yuan a gram now. That, in turn, has led investors in Shanghai and other large cities to hoard the precious metal.

Most investors buy gold bars from banks, jewelry shops and gold traders.

But some "group-buying" websites, or sites that promise customers a discount on a certain product so long as a specific number of them buy it, have also tried to grab a piece of the pie by making gold a part of their offerings, alongside dinners, household appliances, entertainment events and their other usual fare.

Xiutuan.com, a Shenzhen-based group-buying website, has been selling gold bars for 349 yuan a gram.

Its site notes that the return policies it has for most items do not apply to gold.

A customer service specialist for the website, who declined to state her name, said the company will not identify the producer of the gold since "that is highly confidential according to our regulations".

"We do not have a way to sell off the gold bars for cash on our website," she said. "Customers have to find a way to sell off the bars themselves."

Investment advisers said it is difficult to ascertain the true quality of gold bars because online sellers do not disclose the manufacturers or origins of the bars they sell.

"Every gold bar bought from a gold exchange has its own authentication code," said Jiang Qigang, a precious-metal analyst from Shanghai Pudong Development Bank.

"But group-buying websites seldom disclose their supply channels. So it is hard to authenticate and know the quality of gold bars."

Qiong Chunjing, a lawyer from the Shanghai Rolmax Law Office, wondered if such websites are qualified to sell gold and other precious metals.

"The websites have long been selling gold without official authorization," Qiong said. "Although the price they offer is quite favorable, customers will find they have no way to secure their rights if any problems occur."

Buyers will have to decide if the discounts they receive from using group-buying websites are sufficient to compensate them for the risks they take on, advisers said.

Pan Feng, a middle school teacher in Wenzhou, Zhejiang province, recently bought about 10,000 yuan in gold bars from the Industrial and Commercial Bank of China's Wenzhou branch. Although she has heard of people around her getting gold bars from group-buying websites, she said she does not even think of using the sites for that purpose.

"For one thing, they do not give the name of the producers," Pan said. "So it's hard to know if these gold bars are genuine. And since they do not have their own way to sell off gold bars, customers have to resort to going to pawnshops that will buy the gold bars at great discounts, and that's not good for those customers."

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