Daily Market Update

Global Gold Coin & Bar Demand Surges in 2011 – Thomson Reuters GFMS Annual Gold Survey

Gold’s London AM fix this morning was USD 1,662.00, GBP 1,080.34, and EUR 1,299.76 per ounce.

Yesterday’s AM fix was USD 1,642.00, GBP 1,070.27, and EUR 1,281.71 per ounce.


Cross Currency Table – Bloomberg

Spot gold has consolidated gains above the 200 day moving average at $1,640/oz. Gold has climbed 1.5% to a one month high, due to concerns about the Eurozone sovereign debt crisis. Risk appetite has returned lifting markets across the board, after China announced better than expected economic growth in the last quarter of 2011.

Thomson Reuters GFMS annual gold survey released today shows that global investment increased 20% last year to $80 billion, leading to the nominal high last September of $1,920/oz. This is primarily attributed to the physical buying of bullion.

Gold may climb to a new nominal record above $2,000/oz by early next year as concern about currencies and low interest rates encourage investors to seek a protection of wealth, Thomson Reuters GFMS said. 


Gold Spot $/oz  – Daily 1/17/11-1/17/12 – Bloomberg

Gold coin purchases gained 13% last year and will increase 2.7% in the first half. 

Purchases of gold bars increased by 36% to nearly 2,000 (1,194) metric tonnes, concentrated in China, Germany, Switzerland and Austria.

East Asia demand for gold bars rose 53% to 456 metric tonnes.

India rose 9% to 297 metric tonnes and western markets demand for gold bars rose 41% to 335 metric tonnes.

Central banks increased net purchases by a massive fivefold to 430 tons last year, and may buy another 190 tons in the first half, GFMS said.

Combined official holdings stand at 30,788.9 tons, data from the London-based World Gold Council show.

“Attitudes among central banks haven’t really changed,” Thomson Reuters GFMS annual survey said. “There’s still that desire to come into the gold market to diversify some of the assets away from foreign exchange and to boost gold holdings.” 

The Thomson Reuters GFMS annual gold survey also predicts that gold will struggle in the first half of the year, increasing in the later half towards $2,000. 

It also says the gold bull market is losing steam and predicts an end to the run as economies recover next year and interest rates begin to rise. 

These are particularly large assumptions which are unlikely to come to pass. Indeed, rising interest rates will likely be bullish for gold and bearish for risk assets as they were in the 1970’s. It is only towards the end of the interest rate tightening cycle when savers are rewarded with positive real interest rates that gold’s bull market may be threatened – as was seen in late 1979 and 1980.

Separately, Pricewaterhouse Coopers surveyed mining companies and found that 80% of executives expect gold to increase this year to $2,000/oz.  Central bank purchases have increased in the last few years and are expected to continue.

The Eurozone debt crisis is certain to continue for the foreseeable future – as no political, economic or monetary magic wand will be found to make it end. 

The Thomson Reuters GFMS annual gold survey shows how safe haven demand for gold bullion increased again in 2011 confirming gold is still a safe haven in these uncertain and volatile financial times. 

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
(Reuters)
Gold rallies 1.5 pct as China data lifts markets

(MarketWatch)
Gold tops $1650 as dollar slides on China data‎

(BusinessWeek)
Gold to Gain, Copper ‘Favored’ in 2012, Morgan Stanley Says

(WallStreetJournal)
Iran Cracks Down on Dollar Trades

(YourHoustonNews)
BBB warns: Don’t rush to sell your gold

(WallStreetJournal)
Banks Divided On Gold Price Outlook In 2012

(Bloomberg)
Gold to Reach $2,000 by Next Year as Investment Rises, GFMS Says

(The Guardian)
Gold price ‘to hit $2,000 an ounce’

COMMENTARY
(CommodityOnline)
‘Gold and silver to regain shine in 2012’

(ForbesIndia)
Gold still has some shine left in it

(24HGold)
Gold: The Studebaker Effect

(InvestorPlace)
Gold Bugs, Stop Laughing

(KingWorldNews)
Rickards – CurrencyWars, Gold & Inflation Worse than 1970s

(GATA) 
Iranian currency and economy collapsing under tighter U.S. trade sanctions

 

 

 

 

 

Mark O'Byrne
Executive Director

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