Demand Suggests Gold Prices Setting Up to Reward Investors Big-Time
If you want to know where gold prices are headed, look at the precious metal buyers. We see buyers coming in from all over. This is good.
Talk to any gold expert, and they will tell you to look at China and India. They are the biggest consumers of the yellow metal. It’s certainly true, but that’s not all.
It’s not reported in the mainstream, but know that we are seeing several different buyers and this suggests the dynamics of the gold markets could be changing. Focusing on just India and China may not provide us with the whole gold market picture.
Consider this: gold-backed funds in Europe have been seeing massive inflows. In the second quarter of 2017, European gold funds’ gold holdings amounted to 977.7 tonnes. This was the highest level since 2012—the previous peak. (Source: “Gold Demand Trends Q2 2017,” World Gold Council, August 3, 2017.)
Near the end of 2015, European-listed gold funds held 570.2 tonnes. Now, it’s 977.7 tonnes. Simple math: this represents an increase of over 71% in a matter of months.
Gold Jewelry, Bar And Coin Demand Soaring
Now, look at the global gold bar and coin demand. In the first two quarters of 2017, 509.1 tonnes of precious metal was purchased. In the same period a year ago, bar and coins demand was 449.1 tonnes. So, year-over-year, demand increased over 13.0%. Mind you, in the first two quarters of 2017, bar and coin demand was the highest since the first half of 2014. (Source: “Gold Demand Trends Data Tables,” World Gold Council, last accessed August 3, 2017.)
Paying attention to the jewelry demand, usually India is known for jewelry demand. In the second quarter of 2017, its demand increased by 41%. But, for us, that wasn’t anything out of the ordinary.
In the second quarter, we saw double-digit Jewelry demand from Iran, Vietnam, and Turkey. These countries don’t really come to mind when one thinks about jewelry. But they are witnessing robust demand.
Central Banks Continue to Buy
Lastly, don’t forget the central banks. They are quiet buyers no one is paying attention to. They could alone be the force that sends gold prices soaring. In the second quarter of 2017, they purchased 94.5 tonnes of the yellow metal. This was 20% higher than the same period a year ago when they purchased 78.4 tonnes.
Know this as well: the second quarter of 2017 marked the 26th consecutive quarter when central banks were net buyers of gold.
Gold Prices Outlook; Bullish, Massive Gains Ahead
It can’t be stressed enough. Look at gold buyers. They are increasing in numbers and remain persistent. This phenomenon could cause gold prices to soar.
Dear reader, I have said it over and over again, I can’t help but be bullish on gold prices after looking at the most fundamental data. In just a few years, we could be looking at $1,250 gold and say “That was cheap.”
With this, it also can’t be stressed enough how cheap mining shares currently are. Due to low gold prices, investors have turned sour on them. I see them selling for pennies on the dollar. As gold prices rise, mining shares could help investors become rich.
I really question if mining shares are going to be the thing that makes the next batch of millionaires. Obviously, with time, we will know more.