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Gold Market Outlook July 2013

Some market participants have interpreted recent drops in the gold price as the end of the gold bull market. Our research does not agree with this analysis.

In Q1, 2013, central banks continued to add gold to their reserves for the 9th consecutive quarter. These purchases have accounted for more than 100 tonnes of gold. Central banks that have been adding gold to their reserves include Ukraine, Kazakhstan, South Korea, Azerbaijan and Indonesia.

According to the World Gold Council, as of Q1 2013, excluding ETF outflows, overall gold demand has grown year over year. Jewelry, bar and coin demand in India and China has grown approximately 20%. Consumer purchases of gold represent up to 72% of gold demand. Jewelry shops in India and China have been running low on stock, some of them being completely out of stock. Record premiums have been reported on gold bars in markets such as Hong Kong, Singapore, Vietnam, Dubai, and Mumbai. The lower prices have been seen as a buying opportunity in Asia, and our refinery relationships confirm adding multiple work shifts running 24/7 to meet fabrication demand.

China has imported 918 tonnes already in the first half of 2013, which is close to the entire annual imports for 2012.

It is our view that continued demand out of Asia, as well as global sovereign debt levels and weak economic growth sets the foundation for gold to remain attractive over the long term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.