Huge Demand for Physical Gold Continues

This is the news that’s been creating the buzz all over Gold Town for the last few days.  This article has been copied and referenced and twittered and retwittered, so I thought it might be a good idea to talk about it and try to figure out what it really means.  It may be a little bit above the beginner level, but it’s good to stretch ourselves sometimes.

Physical Gold Demand Rises 53%

It was reported by the World Gold Council that the demand for physical gold around the world has increased by 53% during the second quarter of this year, April-June.  The biggest buyers of the precious were consumers in emerging markets whose currencies have been weakening of late.  The leading buyers of gold over this period were – you might want to sit down for this – India and China. What a shock, eh?  India purchased 310 metric tons and China picked up another 275 metric tons.  Those are increases of 71% and 87% respectively over the same period a year ago.

There is an ironic twist to this story in that overall demand for gold, which includes gold ETFs (electronic traded funds) combined with physical gold, actually declined 12 percent over the second quarter.  Physical gold demand greatly increasing; paper gold demand rapidly declining.  Get it?

Physical gold demand grows

So What Does it Mean?

Well, it’s just one quarter so there’s no reason to go crazy with assumptions.  The WGC mentioned that central bank buying has slowed, but it expects the banks to be net buyers of gold in the future.

What’s really interesting, but not very surprising, is that investors, including some with very big pockets like John Paulson, are packing up and leaving the ETFs to rot.  This signifies that either the ETFs were already rotting and the smart money is getting out (which means that the time for getting out is soon coming to an end), or the time when “all paper will burn” will soon be upon us.

What Else?

It’s no surprise that China and India are leading the pack in precious metals acquisition.  China is continuing to focus on getting their metals straight from the ground through courting the resource-rich African nations.  We’ve mentioned this many times already.  Here are a couple of interesting reads that relate to China and gold:

The Hoarding Continues: China Has Imported More Gold In Six Months Than Portugal’s Entire Gold Reserve

Gold Buying Panic In China: 10,000 People Wait In Line For Their Chance to Own Precious Metals

China Gold-Mine Deals at Record After Price Plunge: Commodities

This means that the Chinese and the Indians and every other nation and individual on the planet who is currently purchasing physical gold at this time knows that the economic charade is coming to an end.  They know that the manipulated and manufactured number offered to the public by the Comex has no connection whatsoever with the true value of gold.

So What Should We Do About It?

Nothing more than what we’ve been doing, friends.  We’ve been buying metal on this latest very long correction and we’ll wait for the bottom to show itself (that doesn’t sound right…)  In other words, the bottom of the correction may be behind us already or the big shorts may have another smash in store for us.  As always, we must wait and see.  If another smash does come then we, along with the Chinese and the Indians and the Russians will be buying more physical.

Let’s keep an eye on this rally and see where it goes.

For those of you new to the site, make sure you check out the article Should I Buy Gold Now?  Please share any comments or questions you may have and link to our site on your preferred social medium and forums.  Thanks for reading!  Joe