Gold’s dichotomy: Investment demand plunges, but consumers keep buying (National Post – May 17, 2013)
The National Post is Canada’s second largest national paper.
Today’s gold market is being defined by two trends: aggressive selling by investors in North America through exchange-traded funds, and aggressive buying by consumers in Asia. But for now, the ETF investors are overwhelming everyone else.
Gold prices settled below US$1,390 an ounce on Thursday, and after five rough trading days in a row, they are approaching the lows that were reached during last month’s dramatic collapse.
Amid that turmoil, the World Gold Council (WGC) issued a report that shines a light on how rapidly investors are dumping their holdings.
The report shows that overall gold demand fell 13% in the first quarter of 2013 compared to the same period a year ago. While that is not too bad on the surface, investment demand fell an astounding 49%. Investors sold a net 176.9 tonnes of gold through ETFs in the quarter, or roughly US$9.3-billion worth of the yellow metal.
The gold market is very small, with total demand of about 1,000 tonnes per quarter, according to the council. That means fluctuations in ETF holdings can have an outsized effect on the paper price. Read the rest of this entry »