Gold Hangs on to Asian Demand

Asia looks like the biggest roadblock between gold and a sheer drop.

From New Delhi to Hong Kong and Tokyo to Singapore, consumers have renewed their demand for the precious yellow metal, and keeps its prices afloat.

India and China are the world’s largest gold consumers.

In the first quarter, demand from China touched a record 294 tonnes. 185 tonnes were stemmed from a 19 percent hike in gold jewelry consumption. Coins and bars accounted for 109 tonnes, which increased total gold demand by 20 percent from the same time last year.

Similarly, India demanded some 257 tonnes in the same quarter to make a 27 percent lead over the same period last year. The country also registered a 138 percent increase in gold imports in April alone.

“The fundamentals of the gold market remain robust with growing demand in India and China. The price drop in April, fueled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries,” said World Gold Council managing director of investment, Marcus Grubb.

April witnessed a historic fall in prices, triggering panicky sell-offs and massive outflows from the SPDR Gold Trust, one of the world’s largest exchange traded funds. For three months before, the price of gold had already slid 3 percent on average from the same months last year.

Buying Quality Bullions

Where ETFs suffered, bullions have rallied.

Emboldened by Chinese demand for newly cheap gold, dealers in Singapore and Hong Kong have recently increased premiums on bullions. Premiums in Singapore now hover at $3.50 an ounce, while those in HK may fetch up to $6. Even premiums in Tokyo have risen to prices unheard of since the tsunami of 2011.

To bulls, Japan is also helping the golden cause in another way.

Euro Pacific Capital CEO Peter Schiff expressed confidence that Prime Minister Shinzo Abe’s fiscal policies—which include buying 7.5 trillion in government bonds every month—would eventually abet inflation and in turn, a gold price hike.

“So will the easy-money policies of other central banks that are joining the currency war,” Schiff added.

From January to March, central banks filled their coffers with 109 tonnes, marking the seventh quarter in a row that their purchases crossed the hundredth mark.

21st century Gold Rush

Asia’s penchant for gold could not be more apparent in West Africa, where a latter-day gold rush is taking place.

Since 2005, residents from the county of Shanglin in China have journeyed thousands of miles to mine gold in Ghana. Today, they run almost all small and medium-scale mines in the country, Africa’s second-largest producer of gold

They do so despite existing Ghana laws forbidding non-natives from owning mines of these sizes. They bargain with Ghanaian landowners, who then receive either a constant monthly pay of $5,000 or 10-12 percent in ‘stocks’ from the mine.

Besides, most Ghanaians do not share Shanglin miners’ expertise in pumping river gold, by all accounts a trade secret.

A Shanglin miner could earn $1,600 every day, while a Shanglin production could yield up to 300 grams of gold daily.

Sharon Freeman is an Australian freelance writer and blogger.  She writes about gold and about companies like http://www.ausmint.com