Commentary on the gold market from the World Gold Council

Apr 15, 2013, 12:58 ET from World Gold Council

LONDON, April 15, 2013 /PRNewswire/ --                     

General statement to be attributed to Marcus Grubb, Managing Director, Investment:
"Whilst the World Gold Council does not comment on the specifics of price movements in the markets, this has clearly been an exceptional period in both the markets and the wider political arena with the discussions relating to the Cypriot bailout. When looking at gold price movements it is important to remember that demand for gold is driven by a diverse range of factors and these should be taken into account across the world:

  • Taking a short term view of any asset's performance is fraught with danger; we believe that despite the current turbulence, the long term fundamentals of the gold market remain intact. There are many different types of holders and buyers of gold, from investors who buy it as a long-term store of value and preserver of wealth, through to speculative investors who seek points in the market to enter and exit making a trading profit. Any appraisal of the investment market for gold needs to take all of these facets into account.
  • Demand for physical gold remains strong in India and China in particular. Between them they account for over half of the annual global demand for gold.
  • Irrespective of the current exceptional situation in Cyprus, central banks, particularly in emerging markets, have been net buyers of gold for several years and the conditions and objectives driving these purchases remain in place.  In February, the South Korean central bank purchased 20 tonnes of gold to help it diversify its reserve asset balance sheet. The amount of gold under discussion in Cyprus is 10 tonnes. There would appear to be a healthy central bank market for volumes of this type and the gold market is sufficiently deep and liquid to easily absorb such volumes without undue disruption.
  • Mine production remains relatively flat and new sources are increasingly scarce and more expensive to develop. Gold supply from recycling has climbed steadily in recent years to meet growing demand.

Background market data from the World Gold Council's Gold Demand Trends 2012

  • India and China make up 51.8% of total annual gold demand 
  • Central banks bought 534.6 tonnes in 2012 - the highest level since 1964
  • Gold demand in India was 864.2 tonnes in 2012
  • Gold demand in China was 776.1 tonnes in 2012
  • Private investor demand for gold bars and coins was 1061 tonnes in 2012 (20% above its 5-year average)

Note to editors:

World Gold Council

The World Gold Council is the market development organisation for the gold industry. Working within the investment, jewellery and technology sectors, as well as engaging in government affairs, our purpose is to provide industry leadership, whilst stimulating and sustaining demand for gold.

We develop gold-backed solutions, services and markets, based on true market insight. As a result, we create structural shifts in demand for gold across key market sectors.

We provide insights into the international gold markets, helping people to better understand the wealth preservation qualities of gold and its role in meeting the social and environmental needs of society.

Based in the UK, with operations in India, the Far East, Europe and the US, the World Gold Council is an association whose members include the world's leading and most forward thinking gold mining companies.

SOURCE World Gold Council