Gold demand down (or is it?)

The World Gold Council has published its report on the global demand for gold. Get yours here.

The headline number: gold demand fell by 1% in Q1 '15 to 1079.3 tonnes (y.o.y).

In the section on gold demand statistics, we see that the dollar value of gold purchased in the Q1 '15 was about 7% lower than the value of gold purchased in Q1 2014 (p. 18, tables 2 and 3).

But remember--the US dollar is a whole lot higher over that time period. How much higher? Well averaging the weekly closing price of the US dollar index for every week in the Q1 2015 gives us an average value of 95.104--the same calculation for Q1 2014 gives us 80.359. That is an 18.3% gain.

The gold price itself fell about 7% over that time (in US dollars). But non-Americans purchasing gold in Q1 of 2015 are paying over 10% more that in Q1 2014. In this context, the 1% drop in physical takes on a different meaning. No wonder foreigners aren't buying so much!

Chinese jewellery demand is down fairly significantly. The report suggests that demand for securities trading may have eaten into gold demand. I can only report that the Chinese I speak to are convinced that since gold is going down it is a bad investment.

A nugget of info

. . . from the World Gold Council report (Gold Demand Trends for 2013) issued early this morning.

Hidden away in the middle of the report was an interesting observation--that Germany was the only European country in which investment demand for gold increased over 2012. I suppose all the other Europeans are happy with their euros.

I wonder if it is coincidental that the Bundesbank is the only European central bank to ask for its gold back from the US?

Surging physical demand vs reduction in ETFs

The World Gold Council has released its latest issue of Gold Demand Trends (link to pdf on page). What jumps out at me is their bland assurances that gold demand decreased in the last quarter, as the surging demand for physical was offset by outflows of ETFs.

Maybe this is telling us about a loss in confidence in paper instruments. Of course, in some places in the world there never was any confidence in paper instruments. It's just that the lack of confidence may be spreading.

I like gold. But if paper instruments lose all credibility, finding food will become more of a challenge than most of us would like. So I really hope some action is taken to restore confidence, like arresting some of the multitudes of fraudsters out there. Unfortunately, some sort of draconian currency control regime seems more likely.