Gold
Rushing On By Frank Holmes -
Aug 26 2010 10:07AM
The World Gold Council’s latest quarterly
recap of the gold market confirms much of the big-picture
story we already knew: demand is strong (up 36 percent from
a year earlier), supply (up 18 percent) is not keeping pace,
and global economic worries are driving investors toward
gold as a safe haven.
Drilling down a little further turns up
a number of interesting points:
Investment demand in
the second quarter of 2010 (red bar in the chart) more
than doubled compared to the same period in 2009, and
accounted for more than half of total global demand. Investors
bought the most gold since the first quarter of 2009,
at the depths of the Great Recession.
Demand from exchange-traded
funds rose more than 400 percent to about 291 metric tons
(9.4 million troy ounces), and retail investors bought
about 30 percent more bars, coins and gold in other forms.
Industrial demand is
approaching pre-recession levels. The WGC credits the
growing popularity of new consumer devices like iPads,
Kindle electronic readers and netbook computers with driving
this trend.
Jewelry demand is down
only slightly year-over-year, even though the gold price
has risen from the $900+ per ounce range to $1,200 per
ounce. In Hong Kong, for example, jewelry demand rose
more than 30 percent in physical terms and nearly 80 percent
in U.S. dollar terms.
The WGC says it foresees strong gold demand
through the end of 2010, with India and China leading the
way, along with concerns about economic recovery and the massive
sovereign debt loads in Western Europe and elsewhere.
So far August has been an unusually good month
for gold – as of midday today, the price is up 6 percent
this month, where historically the August price tends to rise
only 2.5 percent above July.
We recently wrote about gold seasonality –
September, just a few days away now, is on average the best
month for both gold and gold equities. Learn why September
means ready, set, gold!
We also have written about gold in the context
of the global economic uncertainty and also about China’s
important role in future gold demand.
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
U.S. Global Investors