Gold prices are up roughly five percent since the beginning of the year. At these “low prices,” demand for gold is surging while supply is constrained. This is setting up gold for the perfect rally.
Current Demand for Gold
In fact, demand for gold is surging in uncanny places.
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Yes, in these pages I have talked about how demand for gold has been rising in gold-hungry countries like India and China, but—while the United States isn’t really known as a major gold-consuming country—between 2014 and 2015, demand for gold coins and bars in the U.S. soared 50%. Between 2015 and 2016, this figure grew another 32%. (Source: “Gold Demand Trends Q1 2017,” World Gold Council, last accessed May 9, 2017.)
In Germany, demand for gold coins and bars is up 13% in the first quarter of 2017, over the first quarter of 2016.
In smaller countries like Thailand and Vietnam, demand for gold coins and bars is up six percent in the first quarter of 2017, over the same period of 2016.
According to Statista, world gold production was flat in 2016 compared to 2015. And, over the past 11 years, gold production has increased at an average annual rate of only 2.3%. (Source: “World gold production by year in mines from 2005 to 2015 (in metric tons),” Statista, last accessed May 11, 2017.)
As for world central banks, they have been net buyers of gold for years now.
Lower Gold Prices Not Deterring Investors
Dear reader; the data is very clear. Lower gold prices haven’t discouraged buyers, whatsoever. Actually, demand for gold is rising while there is no growth in supply. In situations like this, rising demand and tight supply always lead to higher prices.
Meanwhile, the depressed prices of quality senior and junior gold mining company stocks are a bargain right now.
