Gold: Demand Is High and Will Dictate Prices

Source:

". . .85% of the annual world gold mine production was bought by just four identifiable entities so far this year."

Gold and silver rallied over 1% and 2% yesterday as stock markets barely made gains in the U.S. Asian stock markets were mixed but the Nikkei fell 2.5% and most European markets are showing weakness again this morning and gold remains firm.

Demand for gold remains extremely robust with broad-based demand from both retail and pension investors but also now from very large players, such as high net worth individuals, hedge funds, sovereign wealth funds (Government of Singapore Investment Corp - GIC) and central banks diversifying into gold.

The world's central banks were net buyers of an estimated 1.1 million oz in January. Ecuador and Russia appear to have been the main buyers. Despite much signals of intent from the Chinese, there are no records of them buying gold yet (at least not through conventional transparent channels).

Reuters reports that huge flows of institutional money are flowing into money market funds and into the precious metals of silver, platinum and particularly gold. Demand for gold is so large that the world's mining supply will find it extremely difficult to cope with the demand resulting in much higher prices.

The world's largest gold ETF, GLD, has purchased in the first two months of the year more than 65% of all annual global gold mine production. World central banks have bought the equivalent of more than 20%. This means that some 85% of the annual world gold mine production was bought by just four identifiable entities so far this year.

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