Gold Prices: “Shadow” Buyers Quietly Accumulating Gold

Gold PricesThis Could Send Gold Prices Skyrocketing

Gold prices have a bright future no matter how you look at it. The demand for the precious metal continues to surge, which suggests gold prices could soar from the current severely low levels.

Even though gold prices have fallen over 10% year-to-date, we now have even more evidence that shows buyers are taking this as an opportunity to buy more rather than pull back. There are three “shadow” buyers that should be watched closely: India, China, and central banks.

Look at India, China, and Central Banks: Gold Prices Don’t Matter to Them

In the third quarter of 2015, India consumed 268.1 tonnes of the precious metal. In the same quarter of 2014, it consumed 238.2 tonnes of gold bullion. (Source: “Gold Demand Trends Q3 2015,” World Gold Council, November 12, 2015.) Simple math will tell you that the demand for gold in India increased by roughly 13%.

China’s gold bullion consumption was solid in the third quarter of 2015, too. The second biggest gold consumer used 239.9 tonnes of the precious metal; this was also 13% higher than the same period a year ago.

Central banks continue to buy the yellow metal as well, despite where gold prices stand. In the third quarter, they purchased 175 tonnes of gold. This amount is three percent lower than the same period a year ago, but you have to look at their resilience in buying. The third quarter of 2015 marked 19 consecutive quarters when they were net buyers of the precious metal.

Looking at the overall picture, in the third quarter, demand for gold increased eight percent year-over-year, with 1,121 tonnes of the precious metal being consumed globally. In addition, gold investment demand (bar and coin demand) surged 27% in the third quarter.

Looking ahead, the demand situation in the gold market is only expected to get better. Understand that the global economy is in trouble and currencies across the board are falling in value, but the precious metal provides a great hedge against the drop in currencies. Look at the euro, Canadian dollar, Australian dollar, Japanese yen, and others; they are down, but don’t rule out investors looking to hedge this with gold bullion.

You see, gold prices would remain the same or decline if the supply side was improving at the same pace. As it stands, it’s deteriorating, with the total gold supply for the third quarter increasing by just one percent.

Going forward, with gold prices so low, it’s only expected to get worse. Miners across the board are struggling and their production is really at stake. I wrote about this recently, which you can read here.

Gold Prices Outlook: How Anyone Could Be Bearish?

With all this in mind, I don’t know how one could be bearish on gold prices.

Dear reader, don’t buy into the pessimism towards the precious metal preached in the mainstream. Gold prices are down because of all the wrong reasons. Basic economics says prices should be much higher than they are now.

Remember this: markets tend to be irrational at times, but eventually they come back to reality. When that happens for gold, expect prices to skyrocket significantly.

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