Rising Nations have more Investment Demand
Global demand for gold in 2011 rose to 4,067.1 tonnes (t) worth an estimated US$205.5 billion – the first time that global demand has exceeded US$200billion and the highest tonnage level since 1997, according to the World Gold Council’s Gold Demand Trends. The main driver for this increase was the investment sector where annual demand was 1,640.7t up 5% on the previous record set in 2010 and with a value of US$82.9 billion of rotary kiln. The pre-eminent markets for investment demand in 2011 were India, China and Europe.
While western jewellery demand reacts very much to the state of the developed world’s economic states, emerging world demand for ‘jewelry’ sits on the border of decoration and investment. Thus, we prefer to look at it as investment demand.
In much of the emerging world the number of people in the middle class has rocketed where economic growth is such a powerhouse that it is enriching their entire societies. For example, eventually the middle class of China’s population of 1.3 billion people will reach 400 million or so in ore beneficiation machines manufacturing. This equals the population of the U.S. in its entirety. Most of these believe that gold is an ideal form of saving for a rainy day and buy to hold for the long term.
There was also a surge in demand in Europe with the region posting its seventh consecutive annual gain to 374.8t. Germany and Switzerland were the main drivers of growth in the region as the eurozone remains in turmoil and the need for asset protection continues to be a priority.Rotary kiln:http://www.hx-china.com/19.html
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With each of them having a totally different view of the financial system to their developed world counterparts, this source of long-term demand will prove, over time, an overwhelming driver of the gold price, almost equal in power to the central banks demand for gold.
The difference between the two is that central banks, we believe, will eventually want to control the gold market and may in select nations feel it imperative to take their own citizen’s gold from them and into the national vaults.
Right now the Chinese government is encouraging its citizen’s to buy gold [while making exports illegal] for themselves. Its support is also seen in the development of the Chinese gold distribution networks in that country, through the banking industry. It can now, freely import, distribute and sell gold to its people.
China’s appetite for bullion continues to grow. Gold imports by China from Hong Kong increased to 63 tonnes in March from 40 tonnes in February, according to the Census and Statistics Department of Hong Kong. Chinese demand is not as price sensitive as Indian demand but we summarize the two and emphasize that the sensitivity is related more to volatility than its price level. If it were so then the buyer of gold at $300 in 2005 would be saying that at $1,600 it should no longer be bought. But as a new high is reached and stability achieved, thereafter, at that new price, back into the market they go, looking at the price rise since 2005 as a clear demonstration that it has the ability to keep rising.
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