Friday, 4 January 2013

Increase in Gold Demand Does Not Result in Increase in Gold Prices

Question Mark On Gold Price
There seems to be no correlation between the demand in gold and its prices this time. It just doesn't conform to the usual law of supply and demand. It is so puzzling that in spite of the high demand in gold and in the investment of gold that there is now a shortage of it all over the world, there is not much going on in the prices of gold.

Many know the value of stocks or Wall Street is going down and the government is already going way beyond its boundaries.  What is not known yet is that average people all over the world in Europe, Asia and America have been purchasing more and more gold and German gold dealers have been discontinuing the sale of  gold coins. Also, the demand for gold has soared to ten times normal this past week so more orders are impossible to be met for the future. This is also true for all around the world such as in Dubai where gold stocks are depleting.

Since this unmatched demand in precious metals, Muenze Osterreich, producer of gold and silver  Philharmonics, has to work overtime to make more coins. Also, the Mint has been discontinuing the sale of the popular gold Eagles since it introduced the gold Eagle twenty years ago. The reason is because the Mint has a plan to provide a more dependable supply to dealers just on a rationing basis. The shortages are everywhere, so buyers are taking their chances at  Ebay where auctions are available for one ounce Krugerrands and Maple Leafs at $260 over spot price. As believed by experts, supposedly an ounce of gold should now have reached $1100 instead of  just $800/$900.  Why is this so? The answer is because "Comex gold is not gold" and it is pretending to be the price- setter for real gold. "Comex gold" as paper pretending to be gold is in the process of being divulged.

Here is what needs to be known...

Fund managers and not actual gold investors are the determinants for the supply and demand. They especially bet on Comex gold contracts, which they believe will go up in value, to offset their other bets that are losing.

Another thing is that when a fund gets redemption requests from clients who really need cash, there is forced liquidation on account of redemption requests which has nothing to do with the real physical gold market where demand levels are so high which leads to serious shortages of gold. Thus, this forced liquidation then results in the going down in the prices of gold.

In conclusion, demand is just too high yet the price is too little. Not only that but also governments and institutions do not show the correct statistics whenever the need arises.

You may want to read;
1) Investment Protection: Things to Consider in Buying Gold Bars
2) What Makes the Gold Price Increase? (The opposite of this article)
3) Gold - A Smart Investment?


  1. It is obvious that the prices of gold do not fluctuate, as written in the article that the forced liquidation results in the prices of gold going down the way. The increasing demand of gold is a sign that in the near future, the prices of gold will rise and it will prove much beneficial to the investor of today. People all over the world are buying more and more gold, and locally in the countries the prices are indeed rising . Thanks to the economic crisis...