Why Gold Seems Unbreakable


"I'm starting to wonder if my long-term $2,300/oz. target is too conservative."

While the rest of the world has been going to hell in a hand basket, gold (GLD), (GDX) refuses to take a serious dip and is threatening the old $1,260 high. The World Gold Council, the ultimate go-to source for figures on global supply and demand for the barbaric relic, published its Q210 assessment this week. The report paints a positively bullish outlook for the yellow metal.

Investment demand has been skyrocketing, causing total buying to jump 36% to 1,050 metric tons year-over-year. Purchases from the new exchange traded funds have soared 414% to 291 tons. Hoarding of gold bars, primarily in emerging markets, is up 29% to 96 tons. India and China will continue to be the new demand driver for the foreseeable future.

A flight to safety bid from Europeans desperate for a hard alternative to the Euro has been strong. A recovering economy has caused industrial electronics gold consumption, especially from Japan, to jump 14% to 107 tons, near all time highs. Substantially higher prices caused jewelry demand to fall 5% to 408 tons, driven by a pull back in buying from India.

I'm starting to wonder if my long-term target of $2,300/oz. is too conservative (see What to do About Gold). Overall, it is one of the most positive reports I can recall. Gold bugs should print it out so they can sleep with it under their pillows at night.

$GOLD 8/24/10

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