In all the confusion and discussion about the direction of gold prices, there has been perhaps too little discussion about the fundamental fact that nothing glitters like gold. Physical gold is always in demand—in fact, has been in greater demand considering the low price of gold currently.
The Fact Remains: Gold Is Scarce
Physical gold is a rare commodity, and its scarcity makes it more valuable when more people remove quantities in the market, as is happening right now worldwide. Consider that all the gold ever mined would fit into square footage roughly the size of a major league baseball infield. Additionally, many experts point to the belief that more than three-quarters of all gold that is economically recoverable has already been extracted and in the marketplace. This, along with a growing demand, provides a solid floor for the enduring value and attraction of the yellow metal. That demand comes from a number of areas, including jewelry and both traditional and new industrial applications.
Increased Demand for Gold Jewelry
A recent Forbes article highlights this growing demand, quoting Gold Demand Trends with, “Global demand for gold jewelry grew 6 percent year-over-year in the third quarter of 2015 to reach 631.9 tons, marking the strongest third quarter for jewelry demand since 2008.” Those numbers equate to more than 1,750 tons of gold on a year-to-date basis. While this increased demand is partially attributed to lower gold prices, it indicates an unending desire for pieces of jewelry that incorporate gold in their design.
Increased Appetite for Gold Bars and Coins
Analysts report similar increased demand for bullion bars and coins due to the opportunity to pick up perceived bargains. Alistair Hewitt, who runs the market intelligence unit at the World Gold Council, notes, “There were significant gains in bar and coin demand in China and across Europe, but it was in the U.S. where we saw the most dramatic growth, with U.S. Mint Eagle sales reaching their highest level since the second quarter of 2010.” The council reported other indices indicating increased demand, including a growth in U.S. consumer demand growth of a solid 62 percent.
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A Great Time for Bargain Hunters
Bloomberg also took note of strong buying by bargain hunters. The firm reported gold demand at its highest level in two years, with bars and coins at a five-year high. This report also points to the bullish WGC analysis, upping its projection for total demand for the year to 4,200 to 4,300 tons. This would put the demand on par with 2014, which ended up with a total of 4,217 tons. A key factor in this updated forecast was more activity by central banks, moving their purchases towards a total of 600 tons.
Market Uneasiness Makes Physical Gold Attractive
Of course, the overall market uneasiness made it all the easier to look for bargains. The devaluation of the yuan during the summer continues to ripple through the gold-buying community, especially in China. Hewitt also commented on this trend, noting, “Gold will always be an asset of choice for Chinese investors and savers.” He added a sentiment being felt by many gold buyers globally, “A lot of retail investors now want to own something tangible, something real, something which they understand, and gold is something that taps into these strong emotions, which is why we’ve seen such strong demand in Europe.”
This jolt to the gold buying community is one more indication of a growing hope that the market has seen its floor, and that a growing number of trends point to potential for a propitious New Year relative to gold moving out of its recent doldrums.