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Gold’s London AM fix this morning was USD 1,716.00,
EUR 1,320.51, and GBP 1,094.74 per ounce.
Yesterday's AM fix was USD 1,725.50, EUR 1,309.88, and
GBP 1,099.33 per ounce.
The World Gold Council released its comprehensive
report today, “Gold Demand Trends Q4 and Full Year 2011” looking
at demand in gold demand in full year 2011 and the 4th quarter of 2011.
Global Gold Investment Demand - Bar and Coin Demand
Larger Than ETF Demand Which Remains Small
The report is 32 pages long and well worth a read if
you wish to be informed about the fundamentals of the gold market.
Executive Points
Here are the key points which we have garnered from reading the report:
Global demand for gold in 2011 rose a very sustainable
and gradual 0.4% to 4,067.1 tonnes.
Global gold demand was worth a mere US$205.5 billion
which is not a substantial sum considering the size
of global capital markets today. It was the first time that global demand has
exceeded US$200 billion and the highest tonnage level since 1997.
Central banks were net buyers of gold and their demand
surged nearly 6 fold (570%) to 439.7 tonnes in 2011
- compared with 77 tonnes in 2010.
Demand from
the investment sector was the driving force behind demand for gold reaching a
14-year high in 2011.
The investment sector saw annual demand of 1,640.7 tonnnes up 5% on the previous record set in 2010 and with
a value of US$82.9 billion.
Demand for gold bars and coins accelerated, reflecting
a blend of positive influences including concern over the financial health
and future viability of the euro area; high inflation in some countries;
positive price expectations; and the relatively poor performance of a range
of alternative investments.
Investment demand globally surpassed the record high of
2010, with China, India and interestingly Europe (primarily Germany and
Switzerland) all reporting record levels of demand in 2011.
Investment was the main driver of growth, although jewellery and technology were resilient despite higher
and record nominal prices.
Mine production, while rising to a record, increased
minimally and was offset by lower recycling activity and significant central
bank purchases.
Specifically, European investment demand experienced
its seventh consecutive annual gain and accounted for one quarter of all
global gold retail investment in 2011.
Demand for gold bars and coins globally contributed to
strong investment demand, substantially increasing year-on-year in both volume
and value terms.
Investment demand for gold is likely to remain high
throughout 2012 as global economic uncertainty, low
interest rates and high inflation in many economies reinforce the attraction
of gold’s diversification properties.
Central bank were net buyers
and had demand which hit their highest amount in forty years.
Buying in China should overtake India this year as the
world’s top consumer of the yellow metal.
In Q4 2011, China consumed 190.9 tonnes of gold,
compared with India's 173.0 tonnes, ranking China
top in terms of consumption, something the WGC had not expected last year.
The data and info graphic show the continuing and often
underestimated role of gold coin and bar demand over ETF demand which remains
quite small vis-à-vis coin and bar demand and small vis-à-vis
other markets
Investment Demand
Global demand for gold reached 4,067.1 tonnes last
year, the highest tonnage since 1997, due in large part to a nearly 5% increase
in investment demand, which hit a record 1,640.7 tonnes.
Asian countries like China, India, Vietnam, Thailand
and others see bullion as a store of value against the growing inflation and
the ongoing debasement of their currencies.
The fundamentals for gold in 2012 look good. Continuing
low and often negative real interest rates will continue to support
gold’s safe haven status. The Fed’s statement that it will
continue to see rates remain very low until 2014 is very bullish for gold.
Central banks were net buyers of gold and their demand
surged nearly 6 fold (570%) to 439.7 tonnes in 2011
(compared with 77 tonnes in 2010), more metal than
at any time since the end of the gold standard in 1971.
The World Gold Council noted that, “The buyers
are all ... in Latin America, Asia and the Far East and they are basically
enjoying strong growth, fiscal surpluses and growing foreign exchange
reserves."
European Demand on Eurozone Debt Crisis
Financial instability and elevated sovereign, monetary and systemic risk
continues leading European investors to increasing their purchases of bullion
in the form of coins and bars.
The WGC reported that European demand rose by more than
25% year on year to 374.8 tonnes in 2011, with
Switzerland and Germany being the main drivers in the region.
Gold demand in the UK and Ireland remains lack lustre – although the data remains poor in this
regard.
The ‘Other Europe’ category of demand, at
23.4 tonnes for Q4 and 90.8 tonnes
for 2011, now accounts for a considerable proportion of investment in Europe.
A substantial amount of this new demand has been generated by countries with
previously no or very little interest in gold investment, including the UK
and Ireland and a number of Eastern European countries. In value terms,
annual demand from the markets grouped within this category amounted to a
very small €3.3bn.
Demand for gold in ETF products reached a net 154 tonnes in 2011, compared with 367.7 tonnes
in 2010, although more than 1/2 of that total’s investment was solely
Q4 of last year alone, when ETP demand accounted for 86.8 tonnes.
Jewellery Demand
Global jewellery demand totalled
476.5 tonnes in the fourth quarter of 2011, a 15%
year-on-year decline. In value terms, demand was 5% higher at US$25.9bn, a
new quarterly record. On a full-year basis, tonnage demand of 1,962.9 was 3%
below 2010, showing resilience given a 28% increase in the average annual
price. The value of annual demand grew by 25% to a new record of US$99.2bn
Technology Demand
Gold demand in the technology sector declined 3% year-on year in the fourth
quarter of 2011 to 112.3 tonnes, the lowest
quarterly figure since the third quarter of 2009. In value terms, this
translated to a 19% year-on-year increase to US$6.1bn. Annual demand was
measured at a broadly steady 463.5 tonnes,
comfortably above the 456.3-tonne average of the preceding five year period.
The value of 2011 demand surged 28% and reached a record US$23.4b.
Gold Supply
On the supply side, gold mine output rose just 4% (yoy)
but reached a new annual record of 2,809.5 tonnes
last year.
The WGC reported that the producer hedge book increased
marginally for the first time in a decade last year, with 18 tonnes of hedging added to the estimated outstanding
global hedge book of 158.0 tonnes.
Recycling remained high and fell just 2% on the year to
1,611.9 tonnes showing that the ‘(wo)man on the street’ and
much of the retail public in many western countries continues to sell gold.
Conclusion
The figures and data shows that the fundamentals of the gold market remain
very sound with global demand having increased gradually and sustainably and
supply remaining restrained.
Importantly, most of the buying was buy store of wealth
and long term diversifiers (Asian and European coin and bar buyers and
central banks). This is not ‘hot’ speculative money and therefore
this gold is in strong hands and unlikely to be sold for some time.
The recent increase in demand have been very gradual in
tonnage terms and is very sustainable given the extremely low level of gold
bullion ownership internationally and particularly in the western world.
Allocations to gold in global investment portfolios remain negligible.
This in conjunction with a global sovereign debt crisis
centred on the appalling fiscal position of most industrialised nations, the risk of global recessions and
or a Depression and very significant counter party and systemic risk means
that gold’s bull market looks set to continue for the foreseeable future.
World Gold Council: “Gold Demand Trends Q4 and
Full Year 2011” Full Report can be read here.
For breaking news and commentary on financial markets and
gold, follow us on Twitter.
SILVER
Silver is trading at $33.07/oz,
€25.48/oz and £21.12/oz.
PLATINUM GROUP METALS
Platinum is trading at $1,604.00/oz, palladium at
$675/oz and rhodium at $1,500/oz.
NEWS
(Reuters)
Gold Demand Rises in 2011 as Central banks, China
Buy - WGC
(Mining Weekly)
Gold Demand Tops $200 Billion in 2011 - WGC
(Financial Times)
China set to become biggest gold market
(Business Week)
China Seen Surpassing India as Biggest Gold Market
This Year
(The Washington Post)
China poised to overtake India as world’s
biggest gold market as demand surges, council says
(Reuters)
India's 2012 gold imports seen steady - WGC
COMMENTARY
(FirstPost)
How can China overtake India as largest gold
consumer?!
(KingWorldNews)
Embry - Is Greece’s Situation Bad for Gold?
(CBS News)
Precious metal: India's love affair with gold
(ZeroHedge)
Doug Casey: Is A US-Iran War Inevitable?
(GoldSeek)
Debt Saturation Ensures Much Higher Gold and Silver
Mark
O’Byrne
Goldcore
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