What has been particularly strange about the gold market over the past two years is that the stronger the physical demand appearing for gold, the weaker the gold price has tended to get.
In the past few months, the gold price has fallen back from around $1,340 down at one time to $1,190 and now hovering back seemingly trying to breach $1,250 on the upside again, yet by all accounts demand in the two biggest consuming nations has been soaring and they are, between them, taking in virtually everything the world’s gold mines can produce.
The two countries are India and China. A mild relaxation of some of the import controls put on gold in the former saw gold imports rise to around 95 tonnes in September, while the weekly withdrawal statistics from the Shanghai Gold Exchange show that gold demand has latterly also picked up extremely well in China after a good start to the year, but then a marked downturn from March to August.
And, of course, there is the other big unknown in the gold market demand. Is China surreptitiously building its gold reserves, but not reporting the increase until it feels it is politically expedient so to do.
There is a lot of evidence out there in speeches by top Chinese officials and academics (and in a tightly controlled country like China these would seldom be made without some kind of government approval) that China is looking to build its gold reserves to around 8,500 tonnes, thus topping the US’s 8,133.5 tonne official reserve figure. But no-one knows for sure.
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