Gold Demand Up 12 Percent From 2009
According to the World Gold Council’ latest ‘Gold Demand Trends publication’, gold demand has increased 12% from 2009 totalling 940 tonnes. The largest gold consumer, the jewellery industry, has accepted the new price levels and demand has increased 9% in the last year. The best performing markets have been the traditionally big gold nations; India, China, Russia and Turkey, consuming 63% of annual jewellery production.
Retail demand rose 25% mainly driven by bar investments which went up 44%. The total ETF demand fell 7% mostly because trades were consolidating from record high demand caused by the sovereign dept crises. Industrial demand has climbed back to pre-recession levels totalling 110 tonnes which is 13% more than a year ago. The main reason for the rising industrial demand is the steady economic growth in China and India where the majority of electronic components are manufactured.
These figures support the assumption that despite record high prices investors and consumers are willing to invest in gold even at these price levels. Especially the retail bar demand shows that the general public is more aware of gold as an investment than few years ago. The public don’t buy gold only as jewellery but also as something tangible that is not just numbers on paper.
As the money is floating from western nations to emerging nations in Asian, investment demand for gold bullion is likely rise even further in the coming years. Traditionally people from Asia have seen gold as liquid money and they are willing to keep investing in gold even if the price keeps breaking records. They don’t see gold as an investment that you hold for a certain amount of time and sell when the price is higher. Gold is something they keep buying throughout their life, it is perceived as a status symbol in the same way as a nice house or a car is in western world.
China announced that it will raise banks’ required reserves by 50 basis points to tighten liquidity management and control the credit cycle. This practically means that the Chinese government is preventing the economy from overheating which is a very wise decision. This way they can make sure that recent credit crises in western economies will not happen in China. This might push the price of gold down in the near future but once the price finds a comfortable level, it is likely to bounce back since the pressure of a price bubble is off again.
The General Manager of The China National Gold Corp estimates that gold consumption will rise 4% to 430 tonnes in 2010. This proves that China as a country and its people in general are investing in gold and as they get wealthier in coming years demand is likely to keep rising. Taking this and the latest bank announcement into account, China seems to be able to control its economical growth in a wiser way than western nations do. This should calm down the gold market as it has been very volatile in recent months and keep the gold bubble speculators quiet for a while.