> There has been no rush to buy gold in the physical gold market
321gold.com
>>>While gold prices continue to ramp higher due to speculative fervor, there are increasing signs that demand in the physical market is lagging, and lagging badly. There are reports from India that gold purchases for Diwali are sagging badly, perhaps down 50% off of last year's demand, due to the high price of gold. Indians tend to be "value buyers," and it is apparent that they see little value at current price levels. Reports from the jewelry industry in the West, the USA and Europe, also are rather ominous. While such bearish news for gold emerges, it must also be stated that this has been the case for some time now, months and months at the very least, and yet, gold prices have continued to rise to test 7-year highs. This simply demonstrates that, now, the gold market price is being set not by the commercial and industrial faction, nor by the gold producers, but by the judgments and decisions of the speculator and investor(?). This is not good nor bad, it just is. When analyzing any market, it becomes imperative to understand just what is important, and what is immaterial.
While many analysts decry the current market condition, forecasting sharp drops in gold prices because of a lack of actual physical demand globally, the truth is that it doesn't matter, at this point in time. What does matter is the psyche of the speculator/investor. As long as the USD continues its decline, as long as the stock markets no longer lure as before, as long the macroeconomic forecasts remain gloomy, as long as the political scene continues to frighten, gold will remain firm. It has not been rising on an increase in demand from industrial users or jewelry buyers; it is rising due to its fundamentals on an economic basis, as a "safe haven," as a comfort for those seeking shelter from the economic and political storms. Yes, we will see vicious retracements in price from time to time, but gold is now up some 55% from its lows seen just 4 years ago, and looks to move higher.
Speaking of horrible fundamentals, gold demand in Japan has just plummeted. Many years ago, this country held the hope for many gold bulls as it was thought that with their monstrous asset pools, and with the difficulties with their banking system and their economy, that the public would rush into gold. In fact, one year the World Gold Council made the decision to spend MOST of their resources in the promotion of gold as an investment in Japan. Well, In August of 2003, the entire nation of Japan imported a grand total of about 2.6 tons of gold, down 50% from that of last year. To put that into perspective, only about $32.5 Million Dollars of gold was imported into that nation.
It is obvious that very few are buying physical gold. As an example, the only listed security that represents physical gold ownership, without any leverage or margin, is Gold Bullion, currently listed in Australia, although there are plans to "roll out" such exchange traded funds, or perhaps similar securities, in other countries. This fund has been operative for many months now, has attracted international interests, and yet, has currently only 6.5 tons of gold on its books. The performance has been quite poor, as I expected. And yet, open interest and volume on the global commodity exchanges, where the sophisticated investor and speculator come to "play," usually heavily margined, continues to set new all time records. Quite obviously, right at this point in time, physical demand does not matter, as prices continue to rise in the face of deteriorating demand ***. <<<
*** If that isn't a bubble, then I don't know what it is. |
