The World Gold Council’s (WGC) latest quarterly recap shows global gold demand is getting stronger despite rising gold prices. Gold rose 28 percent to record the highest average price for a quarter ever at $1,226.75 an ounce while gold demand jumped 12 percent on a year-over-year basis to 921.8 tons during the quarter.
Jewelry demand, which increased 8 percent on a year-over-year basis, accounted for 57 percent of overall demand, while investment demand rose 19 percent to account for 31 percent of total demand.
It appears consumers and investors, especially in India, China, Russia and Turkey, are growing accustomed to higher gold prices. At the end of the third quarter, gold demand in India had already exceeded that of 2009 and demand levels in China are ahead of last year’s pace.
The WGC says “these results demonstrate that consumers in these countries are becoming accustomed to high price ranges…and consumers are preferring to make gold jewelry purchases at current prices in order to avoid purchasing at higher prices in [the] future.”
Investment demand rose despite a 7 percent decline in investment in ETFs, which has been the biggest driver in investment demand of late.
Chinese investors seeking protection from rising interest rates directed a considerable portion of their savings into gold products, causing demand for gold bars to jump 44 percent. Net retail investment in China reached 45 tons, breaking the previous record of 40 tons set in the first quarter of 2010.
We’ve said this many times, as the economy recovers and per capita incomes in countries such as China and India rise, consumers and investors within those countries will likely see gold as a key investment vehicle because of the cultural connection carried over thousands of years.
Additionally, the official sector—central banks—were net buyers of gold with Russia, Sri Lanka, Thailand and Philippines increasing their holdings. This offset the International Monetary Fund’s continued selling of gold under the current Central Bank Gold Agreement.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
by Frank Holmes
CEO and chief investment officer
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Frank Holmes is CEO and chief investment officer at U.S. Global Investors, a boutique investment advisor specializing in natural resources and global emerging markets. The company manages the U.S. Global Investors World Precious Minerals Fund (UNWPX) and the U.S. Global Investors Gold and Precious Metals Fund (USERX). Read more insights from Frank Holmes and the U.S. Global Investors investment team at the investment blog “Frank Talk.”
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Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
