Gold Demand Down In First Half of 2012, Should Rise Last Half
| by Michael Locklear
June 06, 2012 – Some would say that the Federal Reserve has a huge role in the rise in gold prices after the economic troubles of the world’s banking system and the US and European economies. After what is known as Quantitive Easing 2 (QE2) the price of gold really took off. The Muslim high religious season of Ramadan, the seasons of lights known as Diwali in India, Christmas in the countries that observe the birth of Christ, and other holidays like New Year’s in China all contributed to the meteoric rise of gold demand over the last months of 2011
The demand in the first half of 2012 from countries like India and China has dropped by about 7% according to reports in the world Gold Council. Nonetheless, China still has a lion share of the world’s hunger for gold. There is however a huge drop in demand for gold jewelry in that country since last year. This represents the weakest demand in the last 24 months. Overall, China’s total demand for gold in all forms is down.
Economic troubles in India has also dampened the nation’s purchasing of gold jewelry. They are faced with numerous uncertainties including a fear of poor weather conditions, a stalling economy and the increasing price of gold. The theories of how the Chinese economy is going and concerns about the future of gold prices have them worried. However it is doubtful that this weakening demand from China will last.
As we head towards the last quarter of 2012 and the first quarter of 2013 we again enter the season when gold becomes important in both India and China. Now we are in a Chinese year of the rabbit when gold plays a major role and gold purchases go up. This year the Chinese will enter the year of the Dragon which traditionally involves another substantial increase in gold giftgiving.
The future of gold looks promising after the recent low in demand as more central banks move to expand their reserves. This market has been steadily growing over the last few years. The new trend of the central banks has not been seen in over five decades.
Countries such as Russia, Mexico, Turkey,Kazakstan and others are also increasing their gold reserves. This is being driven by a desire on the part of these nations to move away from the US dollar. It may also be a concern over the future of the euro as the economies of Greece and Spain struggle to stabilize.
As the need for a new collateral emerges, gold is set to play a new role in the global economic systems. As trend watchers have observed since 2008 the price of gold has nearly doubled from around $850 to the current average of around $1620.
Daily gold watchers can see that gold prices move up and down in the short term. However, over time the price continues to rise and we are now approaching its annual seasonal jump. Some investment experts are saying that now may be an excellent time to enter the gold market due to the new trends in the use of gold as collateral and the return of the giving season in various nations around the world. This advice is also fueled by the historic trends in gold prices mentioned earlier.
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