Gold price will rise in 2011
The chart looks good and so are underlying reasons that will help gold price rise further. The main drive is the world wide growing demand for gold as an alternative to the paper currencies. According to the World Gold Council recently released quarterly Gold Demand Trends report, the strength of the global gold market is incredible. During the first quarter of 2011, gold demand grew 11% to just over 981 tons, which amounted to $43.7 billion US dollars at end-of-the-quarter prices.
Investors, looking to protect their assets from growing inflation, fueled the rise in gold volume and price, as it was up 26% from a year ago. Sales of gold bars and coins were up respectively 62% and 42%.
Gold price will continue to rise because of fewer restrictions and high liquidity
If you look carefully at the relatively short-lived gold bull market of the 1970s when price went over $800, one thing stands out - just around 10% of the world population could own gold because of legal restrictions or lack of money. Some 40 years later, you can barely find a country that prohibits gold ownership, while the available liquid capital in hands of investors have reached levels never seen before. Brazil, Vietnam, Nigeria and Russia have now millions of buyers and India population is as passionate about gold as ever.
But it is China that emerges as the fastest growing market for gold investment. Chinese government not simply legalized private gold and silver ownership in 2004, but has been strongly encouraging its citizens to purchase gold bullion, especially in the last 2 years. So in the first quarter, private investors in China bought nearly 91 tons of bars and coins, more than doubling the tonnage from a year ago. Supporting the price trend, Indian buyers purchased 85.6 tons of yellow metal.
Gold demand in China - plenty of room to rise
In 2010 for the first time, the yearly demand for gold in China outpaced the combined total of the United States and European Union. That happened in spite of triple-digit increases in demand from France, Germany and Switzerland.
The important fact that can not be underestimated is that from 2001, the year the Chinese government eliminated last controls on the gold market, to 2010, annual buying of gold grew at a 7.5% compounded annual growth rate. The ongoing concern about inflation combined with huge total wealth of Chinese citizens will continue to ensure the enormous demand and rising prices.
Gold price rise doesn't dampen demand for jewelry
Demand for gold jewelry in China in the end of 2010 stood at over 12 million ounces, despite gold price reaching $1,400 an ounce. Globally, the first quarter of 2011 saw gold closing on $1,475 USD per ounce, while demand for jewelry reached almost 557 tons, which was a 7% rise over 521 tons in first quarter of 2010. Main culprits were India and China. Indian buyers purchased just over 206 tons while Chinese consumers bought additional 143 tons, both figures representing significant increases over the same period in 2010.
ETF holdings declined, but Asian demand is strong and central banks continue buying
Gold ETFs traded on U.S. and U.K.markets, sold plenty of gold in the first quarter. Meanwhile as discussed above, markets in China and India have remained incredibly robust.
Most importantly, central banks of several countries have been buying physical gold, totaling 129 tons in the first quarter of 2011, with Mexico purchasing 93 tons in February and March. That is more than was bought during the first three quarters of 2010, when central banks became net purchasers of gold for the first time in 21 years. Central banks of Bolivia, Russia, and Thailand bought another 39 tons in the first quarter of 2011. Largely because of central banks, total gold supply decreased 4% compared with the first quarter of 2010.
Interestingly enough, People's Bank of China is the 6th largest holder of gold. However, these holdings constitute only 1.6% of its total reserves - a rather low number according to international standards. Thus we can expect several very sizable purchases from PBOC.
So the gold price will rise as it has nowhere to go but up. Global instability, fear of hyperinflation and problems with paper currencies from Dollar to Euro and everything in between, will continue to fuel demand. For more information see Gold Demand Trends.
Fri Jun 24, 2011 11:06AM | Copyright: www.bad-credit-advisor.com | More in Gold Investing | Comments (0)
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