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World Gold Demand in a Bull Market
Two weeks ago, Mining Speculator investment director Greg McCoach wrote to you and outlined the basics of how a gold bull market works. If you recall, Greg mentioned that gold bull markets generally consist of three succeeding events:
- Currency devaluation
- Increased investment demand; and
- Speculative mania buying
We began to see a sharp correction in the value of the U.S. dollar beginning in 2001, which quickly lead to a jump in investment demand.
A subsequent 7-year U.S. dollar bear market helped lift gold prices from $250 to over $1,000 an ounce. Over the same period of time, world gold demand grew in terms of both tonnage and dollars, aided by the introduction of the now widely popular gold ETFs and similar gold investment vehicles.
In July, the U.S. dollar reversed its downward trend, and continues to enjoy a bull market as central banks and foreign governments buy the greenback as a hedge against their own deflating currencies.
This U.S. dollar bull market has significantly pulled down on gold prices. Gold has lost roughly 25% since mid-summer, leading some to believe that the gold bull market might be over.
But it's not!
The current U.S. dollar bull market is short-term and fleeting. We expect the U.S. dollar to top out sometime within the next several weeks, then continue on it's long-term downward trend.
And judging by a significant increase world gold demand, we're certainly not alone.
Despite a five-month drop in prices, world gold demand increased 18%, and made a new all-time record high in term of dollars as lower prices encouraged investors to seek haven from the global credit crisis.
World Gold Demand Increases 18%, Hits Record High in Dollar Terms
World gold demand totaled 1,133.4 tonnes during the third-quarter. This was up 170.1 tonnes, or 18%, from levels of a year earlier.
In dollar terms, this represented a 51% rise to $31.8 billion, an all-time record high! This is a 45% leap from the previous record set during the second-quarter, and a major indicator that the gold bull market is still on track.
And there's even more convincing evidence . . .
The biggest contributor to the increase in total world gold demand in third-quarter was identifiable investment, which was up 137.5 tonnes, or 56%, relative to year-earlier levels.
Driving the improvement in identifiable investment was net retail investment, which increased 121% from 105.1 tonnes to 232.1 tonnes. Switzerland, Germany, India and the United States enjoyed the biggest surge in demand, although shortages of bars and coins were reported among bullion dealers in many parts of the world.
Gold ETFs set a record net quarterly inflow of 150.0 tonnes, boosted by extreme levels of economic and financial uncertainty. The peak in inflows occurred at the end of the September, triggered by the collapse of Lehman Brothers and a fear of banking sector collapses. Net inflows surged by an unprecedented 111.0 tonnes during 5 consecutive trading days, equivalent to $7 billion!
Increasing investment demand is key to any bull market. In fact, it's surging investment demand that will ultimately lead to the coveted speculative mania buying stage and the peak of this gold bull market.
Investment demand continues to grow, which provides strong support for the ongoing progression of the gold bull market, despite a few bumps in the road.
We continue to urge you to buy gold. Bullion dealers around the country are limited in what they can sell right now. But if you have money that you're looking to keep safe, and can find a dealer who can get it for you, buy some gold now before the price spikes.
Good Investing,
Gold World Staff
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Just like we told you back in 2001... buy gold! Since the Fed and government has intervened on the economic situation and made matters worse, this is the exact time to own gold.
A rise in junior gold stocks is just around the corner.
Gold, silver, and many other commodities are getting ready to skyrocket. It's gearing up to what could be the biggest buying opportunity for junior gold and silver stocks ever and Greg McCoach's service, the Mining Speculator can help you.
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Economic Releases for the week of Monday, November 17th, 2008:
Nov 17 - NY Empire State Index
Nov 18 - PPI
Nov 19 - Building Permits
Nov 19 - CPI
Nov 19 - Housing Starts
Nov 19 - FOMC Minutes
Nov 20 - Initial Claims
Nov 20 - Leading Indicators
Nov 20 - Philadelphia Fed
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