Gold Demand Surging in China & India
Posted by Brian Ford on August 05, 2015
There is no avoiding the news in the gold market – the price of the precious metal hit a five-year low in July. Many analysts believe this is merely a temporary dip, however. For example, Bob Alderman of Gold Bullion International, called the notion of an outright crash the work of some “smart guys with a theory” and “pretty far-fetched.” Juan Carlos Artigas, director of Investment Research at the World Gold Council, stated that gold cannot be compared to “commodities such as nickel, copper, sugar or livestock” and that, despite all the sky-is-falling prognostications, it has outperformed the Bloomberg Commodities Index so far this year.
Their upbeat perspective is matched by the recent projections from the latest Thomsen Reuters GFMS gold survey. The report estimates that the gold price will average $1,135 per ounce in the third quarter of this year before rising even further to $1,175 over the final three months of 2015.
A strong dollar, slumping commodities, and less market fear surrounding Greece have all been cited as reasons why gold has fallen so far in recent months. But an ongoing increase in production of gold that has outpaced demand has also skewed the market. “Global mine production increased 2% last year to reach an all-time high of 3,133 tonnes,” stated the GFMS report. “This marked the sixth consecutive year of production growth, prolonged by the legacy of investments made ruing years of high prices.”
There may be a shift looming, however. The fever pitch of investment into new mines that existed back in 2011, when gold eclipsed $1,800 per ounce, no longer exists. And the GFMS survey notes that, despite the overall production increase last year, some mature mines have started to yield less gold. So there are already signs that the annual record hauls from the mining sector will not continue unabated.
An even larger factor favoring higher prices in the future is China. The demand for gold is surging there in response to the nation’s stock market troubles, according to the Wall Street Journal. This current surge will help counteract China’s 7% drop of gold imports in the first quarter of 2015, and it is even more encouraging since it is coming in what is normally a season of low demand. Chinese New Year purchases are not driving the spike, and Hong Kong gold supplier Padraig Seif told the paper that “it has really taken us by surprise,” noting that his revenue tripled in June compared to May.
For all the good news from China, it isn’t even the global leader anymore. India re-took the number-one position last year, according to GFMS, and demand there continues to boom. “India’s gold imports shot up by about 61% to 155 tonnes in the first two months of the current fiscal [year] mainly due to weak prices globally and the easing of restrictions by the Reserve Bank,” reported The Times of India. If this pace holds, the nation will import even more in 2015-16 than the 916 tonnes it brought in during the last fiscal year.
So while some in the West are predicting a fall, many more are looking to the East and seeing a long-term future that will remain golden. For regular gold market updates and exclusive offers from “America’s Trusted Source For Gold,” subscribe to our mailing list and claim your free gold investing guides below or call (800) 300-0715 today.