"I hate living in a world where gold is the only security remaining, but people have lost optimism, and I do not see anything to break this trend," said Peter Munk (or words to that effect, courtesy of English-German-English translation) at an investor meeting in Zurich on Tuesday.
Whether or not gold beats all other asset classes again this decade as it did from 2000-2010, "What drives gold is a changing world," the founder and chairman of the world's largest gold producer, Barrick Mining, is quoted as saying by the Tages Anzeiger newspaper. "We sit here at the beginning of a new world."
Change has certainly come to the gold market since Barrick and the other gold majors began unwinding their 100-million ounce hedge book at the start of last decade. Heavy sellers of their "Legacy" Gold Reserves from the late 1980s to 2008, West Europe's central banks have virtually halted their bullion sales according to new data from the mining-financed World Gold Council.
Excluding the International Monetary Fund's gold sale of 213 tonnes – made to India, Sri Lanka and Mauritius between Oct. and Nov. – signatories to the latest Central Bank Gold Agreement have sold only 1.6 tonnes of gold since September.
The 18-member agreement limits total gold sales to 400 tonnes per year until 2014. It says IMF sales will be "accommodated within the ceilings." And the IMF said last week it wishes to sell a further 191 tonnes of gold in the open market as part of a refinancing program agreed to before the global banking crisis spread to sovereign governments, thus reviving the Washington body's role as advisor and lender of last resort.
Who might buy it? "It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility," said an official from the China Gold Association to the China Daily today.
Speaking on condition of anonymity, and confirming what World Gold Council government-affairs director George Milling-Stanley suggested this week, he said China would instead continue to buy gold direct from its domestic gold mining industry – now the world's No.1 by volume.
"The RBI doesn't want to take a credit risk as there are concerns on the Dollar and Euro now," said an un-named official at the Reserve Bank of India to Reuters early on Wednesday.
"Gold is a safe bet...We buy at market prices [and] are closely looking at the gold market."
The world's No.1 consumer market for physical gold, Indian household demand, meantime "enjoyed a solid recovery [after] an extremely weak first quarter" in 2009, says the World Gold Council, analyzing data from London's GFMS consultancy – the leading information providers for the global gold industry.
Unlike China, India has almost no domestic gold mining output. Its private-household gold demand rose 13% by volume and 57% by value between Oct. and end-Dec. from the same period in 2008, say the GFMS figures. And during full-year 2009, mainland Chinese households grew their physical gold demand 9% by volume and 22% by value. Gold investment demand for bars and coins surged 37% to equal $2.5 billion.
Ever-more gold is moving East, most spectacularly to private hands for now, rather than central bank hoards.
Disclosure: Long physical gold