Gold Price Takedown Leads To Buying Frenzy

“My view is that the US Federal Reserve and the Bank of Japan ’caused’ the gold crash. The rest is noise…

The world is still in a contained depression. Sliding commodities tell us global money is if anything too tight. ‘There is a threat of deflation almost everywhere. A lot of central banks will have to follow the Bank of Japan, whatever they say now,’ said Lars Christensen form Danske Bank.

The era of money printing is young yet. Gold will have its day again.”

-Ambrose Evans-Pritchard, The Telegraph (UK), April 17, 2013

Since I started blogging nearly six years ago, if I had a dollar every time I read somewhere “gold is toast,” I’d be a millionaire by now.

Fine. I’d have a hell of a lot of singles.

And a raised eyebrow from my girlfriend.

Seriously though, what is it with people who absolutely detest the precious metal?

I’m not a big fan of paper assets, but I don’t make it my life’s mission to crucify them whenever I get the chance (website and blog comments come to mind here).

My take on investing is- keep an open mind. Lest you squander major money making opportunities. Certain asset classes simply perform better than others at different points in time.

There’s a time for stocks, bonds, currencies, what have you.

And for a number of global investors, now is the time for gold.

Sure, the precious metal really got hammered in the price department the other week. But this resulted in a buying frenzy of the physical bullion. John Noble reported on the Financial Times (UK) website on April 22:

Asia is witnessing one of the strongest waves of physical gold buying in 30 years, with bargain hunters using the drop in prices to secure jewellery and gold bars.

The feverish buying has left many of Hong Kong’s banks, jewellers and even its gold exchange without enough yellow metal to meet demand. In Shanghai, the gold exchange saw volumes – often seen as a proxy for demand – rising to a record on Monday, while queues formed outside some jewellery shops in Beijing.

To give you an idea of just how crazy the demand is in China, Noble, who’s writing from Hong Kong, added:

Haywood Cheung, president of the Hong Kong Gold & Silver Exchange Society, said the exchange had effectively run out of most of its holdings as members looked to meet a shortfall in supply amid rampant retail demand for gold.

“In terms of volume, I haven’t seen this gold rush for over 20 years,” he said. “Older members who have been in the business for 50 years haven’t seen such a thing.”

The Times piece noted demand for the yellow metal is also strong in India. Something Biman Mukherji and Debiprasad Nayak confirmed on the Wall Street Journal website on April 23. They wrote:

Indian gold retailers are paying more in order to meet immediate demand, as customers scoop up every gold bar they can lay their hands on in the wake of a plunge in international prices.

Indian retailers say they are paying premiums of $8-$10 an ounce over the international gold price, which is around $1,425 a troy ounce. That’s four or five times the premium retailers usually pay for imported gold during periods of peak demand in India, according to traders.

“We have not seen this kind of premium on gold imports in years,” said Suresh Hundia, president emeritus of the Bombay Bullion Association.

Gold demand is not too shabby in nearby Australia either. Jake Lloyd-Smith reported on the Bloomberg website tonight:

Australia’s Perth Mint, which refines nearly all of the nation’s bullion, said that demand has jumped to the highest level in five years after prices plunged, with the factory kept open through the weekend to meet orders.

There’s been strong interest, including from the U.S., with buyers speculating that the metal will rebound from the decline, Ron Currie, sales and marketing director, said in a phone interview from Perth…

“We haven’t seen levels like this since the 2008 global financial crisis,” Currie said yesterday. “Compared to March sales, April sales have doubled or tripled,” he said, without providing figures.

On Friday, April 12, the afternoon fix gold spot price was $1,535.50 per ounce. The price tumbled to $1,380 an ounce by Tuesday, April 16. Today, the London P.M. fix was back up to $1,467.50.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Sources:

Noble, John. “Asian bargain hunters pile into gold.” Financial Times. 22 Apr. 2013. (http://www.ft.com/intl/cms/s/0/56244496-ab39-11e2-ac71-00144feabdc0.html#axzz2RuiP9ndw). 29 Apr. 2013.

Mukherji, Biman and Nayak, Debiprasad. “India Gold Premiums Soar as Demand Outstrips Supply” Wall Street Journal. 23 Apr. 2013. (http://online.wsj.com/article/SB10001424127887324874204578440242906344734.html). 29 Apr. 2013.

Lloyd-Smith, Jake. “Perth Mint Works Through Weekend as Gold Demand Surges on Price.” Bloomberg.com. 29 Apr. 2013. (http://www.bloomberg.com/news/2013-04-30/perth-mint-works-through-weekend-as-gold-demand-surges-on-price.html). 29 Apr. 2013.

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2 Comments to Gold Price Takedown Leads To Buying Frenzy

  1. Latest reports have frenzied buying in Mexico, too.

  2. tj & the bear on April 30th, 2013
  3. Thanks for the info tj. Heavy buying being reported here in the States too.

  4. Editor on May 3rd, 2013

Leave a comment

Survival And Prosperity
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Christopher E. Hill, Editor

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