Buyers Disregard Gold Prices
It can’t be stressed enough: if you want to know where gold prices are going, then pay attention to buyers. Their actions suggest gold bullion prices could soar.
We are seeing a gold rush, but unfortunately it fails to get any recognition.
There are three things you must know: China remains a strong buyer, Indian’s gold demand is astonishing, and mint sales around the world are surging.
To give you some idea about the demand for gold in China, consider this: in March, the country imported 64.1 tonnes of the yellow precious metal from Hong Kong alone. In February, this figure was 42.9 tonnes—this represents an increase of close to 50% month-over-month. (Source: “China’s Gold Imports Jump on Investment Demand as Price Falters,” Bloomberg, April 26, 2016.)
But you must think big picture. In 2015, global gold production was 3,000 tonnes, or 250 tonnes per month. So, in March, assuming output is the same, China imported 25% of all monthly global production.
Here’s something you should also pay attention to: China is the biggest gold producer in the world itself. If it has to import more gold, it should be taken very seriously.
Next, looking at India, it remains a resilient gold buyer despite where gold prices stand. For the 2015/16 fiscal year (ended March 31, 2016), 926 tonnes of gold was imported into the country. (Source: “India’s gold imports drop 16 percent,” Reuters, April 13, 2016.) Again, going back to the 3,000-tonne annual global production figure, India imported one-third of global gold mine production for the year. Impressive.
Something else you should keep in mind: currently, the Indian government is working very hard to curb demand for the yellow precious metal in the country. The government is imposing duties and tariffs, but they haven’t impacted the demand much.
As for mint sales, they continue to amaze me.
Consider this: as of April 27, the U.S. Mint has sold 344,500 ounces of gold in American Eagle coins alone so far in 2016. In the first four months of 2015, the Mint sold 175,500 ounces of gold in American Eagle coins. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed April 27, 2016.) Simple math will tell you that gold demand at the U.S. Mint is running 96% higher than the previous year!
I have said this before and I will say it again—it will not be surprising to see gold sales at the U.S. Mint hit one million ounces if buying remains consistent throughout 2016.
Long-Term Gold Prices Outlook
Dear reader, no matter how you look at it, the demand remains solid despite gold prices trading well below their peak in 2011.
I have been bullish on gold prices for some time now. I see the dynamics of the markets are slowly turning as expected. All of a sudden gold is one of the best-performing assets. Not long ago, near the end of 2015, gold was called a “pet rock.”
Here’s my forecast on gold prices for the long-term: in a matter of a few years, we will be looking at $1,250-an-ounce gold and saying, “Man, it was cheap then,” and the mainstream will be preaching how great gold is for your portfolio. Sadly, it will be way too late then.