Should Gold Investors Be Worried About Demand?

Third quarter investment demand, which includes the sum of ETFs and similar products, and total bar and coin demand, totaled 79.5 tonnes, a 16 percent decline from the previous year. While bar and coin demand slowed, it was offset with strong ETF inflows. Compared to the third quarter in 2011, ETF demand was the best performing sector, increasing almost 49 tonnes to 136 tonnes. It was the strongest quarter in about 2 years and well above the 5-year quarterly average of 88.9 tonnes.

While total gold demand decreased from levels seen in 2011, it is very encouraging for investors that categories still showed improvement over the 5-year quarterly averages. Furthermore, central banks do not appear to be slowing down the printing presses anytime soon, which will provide support to gold’s twelve year bull market.

In the Federal Reserve’s latest Federal Open Market Committee minutes, the central bank showed interest towards expanding its bond buying program into next year. The minutes stated, “A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market.” The Federal Reserve has already expanded its balance sheet by more than $2 trillion in recent years, along side of other central banks around the world.

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Disclosure: Long EXK, AG, HL, PHYS