How Gold Demand Remains Resilient
by Frank Holmes
by Frank Holmes: Managing
Expectations: Why Gold Should Thrive
gold was relatively resilient in the first quarter of 2012, with
global demand falling 5 percent on a year-over-year basis, says
the World Gold Council. Marcus Grubb, managing director of investment,
calls this slight quarter decline in demand noise in the context
of 22 percent rise in the price of gold compared to first
quarter of 2011. Also, gold demand was very strong in the first
three months of last year.
a complex quarter, as you can see by looking at jewelry demand by
country. There was a significant rise in demand for jewelry from
Russia, Egypt, Indonesia, Taiwan, and China, according to the World
Gold Council (WGC) compared to the first quarter of 2011.
Russia, which increased 28 percent compared to the same time last
year, not only reflects stock building, but WGC says consumers had
the wind behind their backs, with historically low inflation,
GDP growth, improving consumer confidence and real wage growth.
The WGC says
that Taiwanese jewelry demand was driven by a strong wedding
season, Chinese New Year gifting and gifts for babies born so far
during this auspicious Year of the Dragon. Indonesias
increase also most likely reflects Chinese New Year, as retailers
replenished supply after a strong buying season.
And, for the
second quarter in a row, overall Chinese demand was higher than
Indian demand, confirming China as the worlds largest gold
market, says Mr. Grubb. Chinas demand in the first quarter
hit a record, bucking the global trend by surging 10 percent
to reach a new quarterly high equating to 255 tons, according
to the WGC.
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Frank Holmes is chief
executive officer and chief investment officer of U.S. Global Investors
Inc. The company is a registered investment adviser that manages
approximately $4.8 billion in 13 no-load mutual funds and for other
advisory clients. A Toronto native, he bought a controlling interest
in U.S. Global Investors in 1989, after an accomplished career in
Canada’s capital markets. His specialized knowledge gives him expertise
in resource-based industries and money management.
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