Sunday, October 5, 2014

Gold Demand From Asia is STILL Strong

As for gold, my thesis has been – going back to 2010 – that there was more demand for gold than there was supply. Central banks were surreptitiously making up for the shortage by supplying the market.

Demand from Asia is still strong. Trading on the Shanghai precious metals exchange is very robust, even if it’s been a little weaker lately. We also have India sitting in the wings. They have this restrictive policy that is still impeding what would be huge amounts of imports.

China has increased its purchases of gold by 1,000 tons per year over the last 5 years. This represents an extra 25% of demand in a 4,000-ton gold market. So why isn’t the price of gold going up? That to me is about as bizarre as you can get. China also bought 18% of the silver supply. Despite this new demand, the price of silver went down.

Last year, the ETFs made up for the shortfall, with around 900 tons of physical holdings leaving the ETFs. The market is only about 4,000 tons so that’s over 20% of the market. This year, contributions from the ETFs are nearly zero, so if demand stays the same, someone has to come up with the 900 additional tons of gold.

A lot of people agree the central banks have a major hand in this.

- Eric Sprott via Gold Investing News