Gold prices are within $US60 to $US70 an ounce of the 27 year high of $US730 an ounce reached just over a year ago.
They closed around $US661 an ounce in New York overnight.
It would seem that China is emerging as the big influence, adding to rapidly rising demand from India, which is shrugging off the impact of last year’s sharp price rise.
That would add to the country’s undoubted influence on the output side where it has been the fastest rising producer in the world.
The WGC said “The ‘Year of the Golden Pig effect’ impacted strongly in China in the first quarter of 2007, providing a further boost to already robust growth in global demand for gold.
“Consumer demand for gold in China was up 31% on the same quarter last year, as the Chinese flocked to buy gold jewellery and commemorative “lucky balls”, particularly around Chinese New Year in mid-February.
“Figures last week by WGC showed global demand for gold reaching $17.4bn, more than double the level of four years earlier. (That’s solely due to the sharply higher prices).
“The figures, compiled independently for WGC by GFMS Limited, showed identifiable demand for gold in Q1 2007 was 4% higher than Q1 2006 in tonnage terms and 22% higher in dollar terms.
“Demand in the world’s largest gold market, India, also surged in the first quarter, rising by 50% on Q1 2006 figures.
“Strong economic growth and the onset of the wedding season played a role here, but, more importantly, the development provided strong evidence of consumers’ comfort with gold prices above the $650 mark.
Total consumer demand reached 211 tonnes, just six tonnes short of the previous first quarter peak in 2001, when gold was less than half the price it is now.
“Spurred by strong economic growth in key markets and a less volatile gold price, coupled with sustained promotion, jewellery demand was 17% higher than the weak Q1 2006 in tonnage terms and 38% higher in dollar terms.
“Net retail investment was 28% higher than Q1 2006 in tonnage terms and 51% higher in dollar terms.
“However slower growth of exchange traded funds, compared to Q1 2006, resulted in total identifiable investment falling 26% in tonnage terms and 13% in dollar terms.
“Industrial demand was up slightly on Q1 2006, 1% higher in tonnage terms and 18% up in dollar terms.
“Electronics demand, which grew strongly in 2006, recorded a further 2% increase in tonnage compared to Q1 2006.
“The long term outlook for industrial demand was given a boost by the recent announcement that Nanostellar Inc had devised a new nanoparticle coating, containing gold, for use in the diesel automotive catalytic converter market.”
(This is a big deal. Strong demand for cars in China and to a lesser extent, India, has powered a sharp rise in the world prices for platinum and palladium. Platinum is now being used in the rapidly growing diesel vehicle market, especially in Europe and Asia. Palladium, is used in catalytic converters for unleaded petrol powered vehicles.)
The WGC said that the outlook for Q2 was on the whole”looking very positive with good jewellery demand in most key markets.
The Akshaya Thritiya festival originally considered an auspicious day for starting new ventures, investing or buying in Southern India, but now promoted by WGC as a nationwide gold buying occasion was highly successful.
“Overall prospects for investment continue to be positive with a number of underlying political and economic factors well-aligned and an increasing number of gold investment vehicles available.
“Gold supply remained tight during the quarter.
“A fall in scrap supply as consumers became accustomed to current prices and restrained from selling their jewellery, coupled with further dehedging by mining companies, were the main reasons for a 2% fall from the already constrained figure for Q1 2006. (Such as Lihir Gold which has unwound all its hedges at a cost of around $1 billion.) Net central bank selling was close to year earlier levels.”
And China’s growing influence in the world gold market (it is the fourth largest producer) was remarked upon by the CEO of Gold Fields Ltd yesterday in Perth.
Ian Cockerill told delegates at the Paydirt gold conference in Perth that the gold price was trending upwards; that we are firmly entrenched in a bull market for gold; that he believed the price of gold remains in a strongupward trend and that demand for gold was strong, particularly from China.
