Sean: jewelry sales lead increased gold prices.

China’s housewives are getting credit as a major force in gold buying. They reportedly spent $16 billion over the past two weeks ... as they purchased 300 tons of gold.

In fact, the China Gold Association reported that gold sales had tripled on many days, and there were long lines outside many shops.

It’s not just mainland China. Hong Kong retailers report they were swamped over the three-day May Day holiday by tens of thousands of mainlanders in search of one thing: cheap gold.

In April alone, Hong Kong gold sales soared 150%! However, there is a method to their gold-buying madness.

These buyers are price-sensitive, so we can’t expect this feverish pace to continue if prices go higher. But it should put a floor under the price of gold.

Here's why this is so important  ...

Booming Jewelry Demand Usually Leads Gold Prices. According to research from Citigroup, an increase in jewelry purchases like we’re seeing now is usually associated with gains in gold prices. Here’s a chart from Citigroup (jewelry demand is shown in blue)  ...

As you can see by looking at the chart, rising prices usually weighs on gold jewelry demand. Likewise, rising jewelry demand usually sparks higher prices.

India is Catching Gold Fever, Too. Demand for gold in India — the world’s biggest consumer — is double the level for this time of year, as Rajesh Mehta, chairman of Rajesh Exports Ltd., told Bloomberg last Wednesday. Premiums paid by jewelers in India to secure supply surged as much as fivefold in 10 days.

Some estimate that India will boost its gold purchases by 20% year-over-year. If India and China together were to boost consumption by 15% in 2013, that would result in 250 metric tons of gold being acquired by the two countries.

U.S. Mint Gold Sales are Booming. Sales of gold U.S. Eagles totaled 209,500 ounces in April, up from 62,000 ounces a month earlier, and up 10 times year-over-year, according to data on the Mint’s website. That’s the highest level in three years, since 231,500 ounces were sold in December 2009.

Central Banks Keep Buying. Central banks own about 19% of all the metal ever mined. Their combined reserves have risen to an eight-year high as nations from Russia to Kazakhstan to Mongolia expanded holdings, International Monetary Fund data show.

The banks bought 534.6 tons last year, the most since 1964, and may add as much as another 550 tons in 2013, according to the London-based World Gold Council.

Gold Buyers Forced to Go on Waiting Lists. According to a report in the London newspaper, The Telegraph, one company is reporting waiting lists of three weeks for some coins, and four to six weeks for gold bars.

The Telegraph reports that investment company Physical Gold says “many clients are willing to ‘do a deal’ and wait for delivery, as they want to secure the current price as they feel it will be higher in the near future.”

This documents my earlier statement that the elite made a mistake in the takedown of gold prices. What they have achieved is a stimulation of actual gold sales.