One megatrend continues on its path, unperturbed, with no end in sight: The East's huge push for investing in gold.
This was discussed in a recent Money Morning article on the "Love Trade" in gold by guest writer Frank Holmes of U.S. Global Investors.
Wall Street, never enamored with investing in gold in the first place, still leads the charge to sell the precious metal at every opportunity.
Meanwhile, Asians - led by India and China - pick up as much of the shiny metal as they can every time the price is pushed lower by Wall Street selling.
Just look at what happened when gold prices hit a two-year low in mid-April thanks to huge short sales in the futures market. This set off a buying frenzy in Asia for gold, according to the World Gold Council (WGC).
The WGC says Asian gold demand in the current second quarter is expected to hit a record high. The Council expects Indian gold imports to be between 350 and 400 tons in the quarter, up 200% from a year earlier and nearly half of 2012's total gold imports!
Its managing director, Marcus Grubb, said net imports of gold into China in April alone were around 160-170 tons. Demand has continued apace since then, so the WGC believes demand could reach 880 tons this in China.Why Investing in Gold is a Favorite Choice for China, India
Demand for gold in China and India was already growing, even before the mid-April selloff.
In the first quarter, the WGC reports that Chinese gold coin and bar demand hit a record of 109.5 tons (up 22%) and jewelry consumption jumped to 185 tons. The five-year average for gold investment demand (bars and coins) had been only 43.8 tons, so clearly demand has hit another gear as people become wealthier in China.
Overall, China's gold demand in the first quarter (before the steep price selloff) jumped by 20% to a record high of 294.3 tons.
Obviously, that record will be shattered in this quarter...
The China Gold Association recently stated that gold imports will swell further, even after more than doubling to an all-time high in March (again before the price selloff).
In India in the first quarter, bar and coin purchases hit 97 tons (up 52%) and jewelry demand rose to 160 tons in the first quarter.
Not surprisingly, India and China account for more than 50% of global consumer demand for gold bullion - the Love Trade, indeed.
The demand for the precious metal in Asia can also be seen in the premiums Asian buyers are willing to pay above the spot price for gold. Premiums hit an all-time record of between $5-$7 per ounce in Hong Kong, Singapore and elsewhere in Asia as buyers waited in long lines to buy their gold at Wall Street sale prices. Premiums are at record highs because of a shortage of physical gold in Asia.US Gold Coin Sales Hit Three-Year High
Of course, the Love Trade is not just limited to Asians. Some investors here in the U.S. are not following Wall Street's lead.
These investors, as Frank Holmes indicated, are buying gold coins from the U.S. Mint.
After the gold price tumbled in April, sales of gold coins from the Mint rose to the highest level since December 2009. Sales came in at 209,500 ounces, well above March sales of only 62,000 ounces.
Investors are also going to coin dealers.
Todd Dutkevich, a senior account executive at American Bullion Inc., told Bloomberg earlier this month, "People are flocking to buy physical gold. The price drop has made it possible for many retail buyers to add gold."
But the real story continues to lie in Asia with its traditional love of gold now mixing with increasing prosperity of the population.
Marcus Grubb of the World Gold Council summed up the current situation in the gold market nicely.
He believes all of the gold sold through sales of gold ETFs by U.S. investors will find a home in Asia.
He said, "Even if ETF outflows continue in the United States, it is quite likely that the gold previously held in ETFs will find a ready market among Indian, Chinese and Middle Eastern consumers who are taking a long-term view on the prospects for gold."
For more on investing in gold, check out what the recent gold crash has done to gold prices: Has the Great Gold Crash Divorced Bullion from Futures Prices?
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