Gold supported by ongoing societal unrest

You are also unlikely to encounter the dissection of figures related to jewellery demand in various parts of the world. Much will be made of the 135 tonne increase in Chinese full-year gold jewellery demand. Good thing it was higher, too, because if one adds up the nearly 80 tonnes of such demand that were lost in the rest of the world (including important regions such as the Middle East, Europe and the US) the market needs “ChIndia” to pedal as hard as possible in this sector of demand. You can see here why this is so:

Jewelry demand by country

As well, market inflows of scrap gold remained well above their historical levels, virtually tying their record 2009 inflows and coming in at 1,653.00 tonnes during the past year. Record-high prices were cited as the catalyst for that development. Meanwhile, during a year when we were being guaranteed that the official sector was going to turn into a ‘massive’ buyer of gold, the world’s central banks bought…all of 87 metric tons of gold more than they sold.

The good news is that the world’s central banks did not come to market with the amounts of bullion they had been selling over two decades, on a yearly average basis. The potential to mobilize some official sector gold – even if not a lot – from reserves remains very real, however. The percentage-in-reserves that $1,400 gold has now yielded on the balance sheets of many a ‘budget-squeezed’ and ‘credit crisis-bruised’ central bank is sure to raise some questions and engender some vigorous debates in 2011 and 2012, at various policymaking meetings, here or there. Stay tuned. The odd of sales by the IMF and the plight of poor nations, and such, that’s a whole different topic, for another day.

While central banks collectively were net buyers for full year 2010, selling of gold still outpaced purchases during Q4 of the year. Finally, for 2010 as a whole, (again, this was a year during which there was no shortage of “peak gold” alarmism being pumped into the marketplace) total mine supply of gold rose by 9% to 2,543 metric tons, according to the report- data for which was compiled by the London-based consultancy firm, GFMS. Also noted were huge drops in producer de-hedging (a process which is thought to have added much to gold’s hefty price gains over the past decade).

Until tomorrow,

Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America

Websites: www.kitco.com and www.kitco.cn

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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