Back in 2011, when the price of gold bullion was marching towards the $2,000-per-ounce mark, it was becoming difficult for the average investor to get into the “gold game” without paying a high price. Since the beginning of this year, we have seen gold bullion prices come down and we are seeing investors running to buy the precious metal.
I have written many times in these pages how demand for gold bullion here in the U.S. is strong, especially when we look at rising sales from the U.S. Mint. But this is only part of the picture. When we look at what’s happening in the biggest gold bullion-consuming countries, we can really get a feel for gold bullion demand.
According to the Chinese Gold Association, 706 tonnes of gold bullion were consumed by the Chinese economy in the first half of this year. In the same period a year ago, consumption of the precious metal in the second biggest gold bullion-consuming nation was only 460 tonnes. (Source: Reuters, August 12, 2013.)
In India, despite the efforts of the country’s central bank and the government to reduce gold bullion consumption, the official numbers state that imports of the precious metal increased to $2.9 billion in July from $2.45 billion in June. (Source: Reuters, August 12, 2013.)
The demand for gold bullion in India is so extreme that it’s at a point where it is causing a boom in imports of the precious metal into neighboring countries like Pakistan. Imports into that country increased 386% in the first half of the year.
Looking at the technical side as shown on the chart below, there is bullish sentiment in the precious metal’s price. Gold bullion looks to have support at the $1,275-per-ounce level. At the same time, for the first time since late July, gold bullion prices have closed above their 50-day moving average.
Chart Courtesy of StockCharts.com
The prospect of a higher gold bullion price is strong, and continues to gain strength. With that said, I see great opportunities in the gold mining sector. The risk/reward ratio for investing in well-managed gold mining companies is much better than overall market risk.
What He Said:
“A Stock Market’s Obituary: It is with great sadness that we announce the passing of the Dow Jones Industrial Average. After a strong and courageous battle, the Dow Jones fell victim to a credit crisis and finally succumbed on Friday, October 3, 2008, when it fell decisively below the mid-point between its 2002 low and its 2007 high.” Michael Lombardi in Profit Confidential, October 6, 2008. From October 6, 2008 to November 27, 2008, the Dow Jones Industrial Average experienced one of its biggest two-month losses in history.