If the U.S. investors are not interested anymore in buying gold in large quantities (fact that was visible by the drop in the gold price) the Asian markets still believe in gold as a long-term investment. In only 4 days the price dropped from $1535 to $1390 and now nothing seems to have enough strength to bring the price up were it was in April before the drop. Recently, the price of gold remained in the $1380/ounce area. The situation in April was mainly caused by the large quantity of gold sold by Greece, at the IMF’s advice in order to sustain the bailout program, followed by a negative outlook in the price of gold by Goldman and Sachs.
As I said before, Asia is particularly interested in gold. Thus, China became the number one consumer with a level of demand of 33% followed by India with 28%, Middle East and Turkey with 9% (a remarkable difference comparable with his precedent). The U.S. are representing only 4%, the second lowest place, whereupon Russia with only 2% (the other places are covered by East Asia with 8%, Europe with 6% and other countries with 10%). Still, the most recent international statistics are showing that the number one holder of gold are U.S. (8133.5 tonnes) followed by Germany with 3391.3 tonnes and the International Monetary Fund with 2814 tonnes. We can conclude that the price of gold will be most influenced by U.S. which for the moment seem to take a short position while the long position is likely to be taken by Asia.
In a research followed by The World Gold Council, it has been shown that the price of gold is like to return on an increasing trend on the long term. The strong demand registered in the first quarter of the year is indicating nothing but positiveness about the precious metal and this tendency is likely to remain likewise. This year, because of the drop in price from April, the demand at the consumer level has been increased at record highs, making 177 tonnes of gold outflow from the American ETFs and probably retreating in the Asian zone, where the number of consumers of gold have increased by 16% in May 2013 comparing with May 2012. The retail investors’ interest in gold has been observed since the start of the financial crisis when gold became the number one safe-deposit box for their savings.
What to expect next? Well, for sure the U.S.’ move we need to wait. The evolution of the Quantitative Easing Program is likely to have a visible impact on the price of gold. As has been announce several times this year, in a way or another, the QE Program will end, but effective measures haven’t been taken yet. Therefore, an announcement about the end of the program may be the sign that gold will overcome the rage zone.