From Kitco.com
How Long Can Gold Prices be Held Down? - Demand Factors
January 20, 2014
As we discussed in our last article, China has managed to acquire well over 2,000 tonnes of gold while the gold price has fallen from $1,650 to $1,180. This is a remarkable feat in itself.
So the next logical question is, “How long can they keep on doing this without the gold price rising rapidly?” The short answer: As long as demand in the traditional markets is either lower or the same as supply. This has two aspects, first the potential for rising demand and second, the potential for falling supplies.
DEMAND
London Physical Market
The main traditional market is London, where supposedly 90% of physical gold is traded. China buys there, ‘on the dips’ by importers taking bulk supplies and shipping them to Hong Kong (and Shanghai?) as stock for the distributors to the retail traded. This is replenished according to perceived future demand, hence the premiums that appear there. It’s done in a way so as to not push prices higher. But they buy large volumes from other sources, direct.
Indian demand is routed through the London market totally, via the banks that supply India. European and U.S. physical demand accesses much of its gold there too. These buyers have been negative gold for over two years now, but particularly in the last year. Will that demand pick up?
For Europe and the U.S., we don’t expect it to do so while the U.S. is selling gold from the gold Exchange Traded Funds, based there, to switch into equities. European investors expect the same scene as we see in the U.S. now in the next two years, but we do not see selling in Europe at anywhere near the levels seen in the U.S. in 2013.
Read more from Kitco.com >>
How Long Can Gold Prices be Held Down? - Demand Factors
January 20, 2014
As we discussed in our last article, China has managed to acquire well over 2,000 tonnes of gold while the gold price has fallen from $1,650 to $1,180. This is a remarkable feat in itself.
So the next logical question is, “How long can they keep on doing this without the gold price rising rapidly?” The short answer: As long as demand in the traditional markets is either lower or the same as supply. This has two aspects, first the potential for rising demand and second, the potential for falling supplies.
DEMAND
London Physical Market
The main traditional market is London, where supposedly 90% of physical gold is traded. China buys there, ‘on the dips’ by importers taking bulk supplies and shipping them to Hong Kong (and Shanghai?) as stock for the distributors to the retail traded. This is replenished according to perceived future demand, hence the premiums that appear there. It’s done in a way so as to not push prices higher. But they buy large volumes from other sources, direct.
Indian demand is routed through the London market totally, via the banks that supply India. European and U.S. physical demand accesses much of its gold there too. These buyers have been negative gold for over two years now, but particularly in the last year. Will that demand pick up?
For Europe and the U.S., we don’t expect it to do so while the U.S. is selling gold from the gold Exchange Traded Funds, based there, to switch into equities. European investors expect the same scene as we see in the U.S. now in the next two years, but we do not see selling in Europe at anywhere near the levels seen in the U.S. in 2013.
Read more from Kitco.com >>
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