Gold spot prices may suggest the precious metals market is not performing well at the moment, but the physical data suggest there is a greater demand for gold that the charts indicate.
Both the US Mint and the Royal Mint in the UK reported they had sold-out of their forever popular sovereign coins and this week issued another batch. Furthermore, last week the London bullion market reported a shortage of 400-ounce bars which subsequently pushed up premiums.
The shortage of gold bars in the UK is due to the sale of precious metals to the Far East and more significantly that the bars were used as ETF investments. The bars were subsequently refined into smaller bars and no longer available on the London market.
Demand for physical gold
The demand for physical gold outweighs ETF´s at the moment as investors lose interest – and possibly faith – with exchange-trade funded investments. Savvy investors recognize that only physical gold will be worth anything if the next financial crash wipes out national economies.
Another reason for the huge demand in physical gold is due to poor economic data that has come from the US recently. It appears the US job market and consequently the economy is not performing as well as originally thought when figure were published in the first week of the New Year.
At that point the employment figures showed a 7 per cent improvement which prompted traders to relax on precious metal trades in favour of the equity markets. However, the early data did not show a true reflection of the actual employment figures as many of the job vacancies included in the January report had in fact been delayed due to the seasonal break.
By gold quickly
There has not been such an extraordinarily high demand for physical gold since the 2008 banking crash – during which time gold and silver bullion was rationed. Whilst recent purchasing patterns have been concentrated in Europe and the US, there could be a worldwide coin shortage because mints cannot meet demand.
It is understandable that casual investors are keen to include gold as part of their investment portfolio. With gold prices so low at the minute, this is an ideal time to buy precious metals as a long-term investment. Gold prices always rise eventually.
The purchasing patterns of casual investors indicate there is a lack of faith in the economy. Although economic data does show the global economy is strengthening, there is little trust amongst the common man that the economy will hold secure. In fact, we already know it will collapse again – which is why gold is such an important investment.
When currency is weak, gold is strong and according to some analysts the next financial disaster is just around the corner. And many fear the next collapse will be worse than 2008. We have had the credit crunch – next time it will be the credit crash!
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