Gold bullion is referred to as “physical gold;” it’s pure gold (99.9%) that can be bought or sold for investment purposes. Investors can buy gold bullion as bars or coins through banks or bullion dealers, but they must pay a certain premium over the spot price. Investors may hold gold bullion for many purposes including the protection of their wealth.
Since 2002, there has been a significant rise in gold prices and, as a result; those who bought gold bullion bars and coins have done really well.
Going forward, the prospects of holding gold bullion look great. There’s a significant amount of demand emerging from the central banks, which, to begin with, were actually against holding the yellow metal. There’s also huge demand from consumers around the globe, but consumers from India and China are at the forefront of it. They are buying. If the demand remains as it has been, then the price of gold bullion could rise significantly, and those who are buying now will see solid returns on their investments.
The demand and supply situation for gold bullion, something I’ve often talked about in these pages, has taken a new course…one very favorable to gold bulls like me.
Gold buying in India is up 450% in the first nine months of 2014 compared to the first nine months of 2013. (Source: Government of India, October 14, 2014.) The jump in gold bullion buying in India is related to the easing of restrictions on gold imports into the country by the Indian government in 2014.
The buying of gold bullion in China continues to be strong. And world central banks are increasing their gold reserves, too.
In the chart below, I’ve compared the gold holdings of various central banks now compared to their gold reserves in 2011.
Three-Year Change in Gold Reserves of Five Countries
|Country||Gold Holdings in October 2011 (in tonnes)||Gold Holdings in October 2014 (in tonnes)||% Change|
Data source: World Gold Council web site, last accessed October 23, 2014
Mind you, the central banks mentioned in the table above are just a few of the many that have posted a significant increase in their gold bullion reserves. Unfortunately, many countries (like China) do not regularly release data on their gold purchases.
Meanwhile, the supply side of the gold bullion equation is bleak.
As I wrote in 2013 when gold bullion prices got whacked, the lower gold prices go, the more mines taken off-stream as gold mining companies close operations where production costs come in at … Read More
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