Developed World Needs Gold Supply More
Investment demand was the only sector of the gold market to register year-on-year growth in the first quarter, which was led by solid demand for ETFs and similar products. Inflows into the sector of 51.4 tonnes almost cancelled out the 62.1 tonnes of net outflows in Q1 2011. Demand for medals and imitation coins, a category of demand dominated by India, grew by 7% although remained very modest at 26.6 tonnes with the use of hammer crusher. Demand for gold in the jewellery and technology sectors declined in response to US$ prices that were, on average over the quarter, 22% above year-earlier levels. Growth in the investment sector was led by an improvement in demand for ETFs and similar products, although demand for gold bars and coins moderated in comparison with the exceptionally strong first quarter of 2011.
While the developed world has a sophisticated set of financial markets the emerging world has only had that for the last few years. In China they still have a way to go before they equal the financial skills and infrastructure now seen in the west. In India the financial system has not been able to achieve the sophisticated levels of the west. The inherent distrust in government and its attendant bureaucracy has created a ‘cash’ society, independent of the banking system that thrives. Gold is an inherent part of that system. The trust that we see in the west, in their financial systems, is just not present in the emerging world. That’s one of the prime reasons why gold is so favored.Hammer crusher:http://www.hxjqchina.com/product-list_20.html
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That trust in the financial system is one of the prime reasons that gold is not such a favored investment in the developed world. It requires no financial skills to make it earn income or develop a profit-making entity in Raymond mill production. It is a cold, lifeless, object outside the reach of the entrepreneur. It is insurance against the failure of capitalism and its paper money. That’s why we have seen a switch from gold derivative buying to the metal itself.
To emphasize the point, an investment in a Gold Exchange Traded Fund is an investment in a quantity of gold held in a bank against which shares are issued. The fact that it is unallocated gold makes it a profit-seeking investment. As you can see in the table, investment in gold Exchange Traded Funds fell to 25% of its 2009 level this year. Investment in coins and bar gold has doubled. Holding allocated gold, or gold coins, or gold bars takes it out of the financial system and gives it that quality long-term gold investors seek. As doubts about the banking system and debt linger, this trend may well grow. The above figures tell us the story.
We expect this trend to continue and to swell in line with the growing doubts about the financial system in the years ahead. Add this to emerging world and central bank demand and you have the three main price drivers in the years ahead. They are enormous, relative to declining supply factors of re-cycled gold and barely growing, newly mined gold supply.
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