The US presidential election is over. Could we foretell something from this for the gold price? I do not think that it is very clever to exactly correlate the election outcome alone with the gold price of course. I think that the case for gold price is different. But it is interesting that usually the price of gold did not do too much in the election year’s (2000: -3.5%, 2004: +3.5%, 2008: +3.5%; 2012: +7% till October) and move more significantly during the following years both ways of course (1997: – 21%, 2001: 0%, 2005: +20%, 2009: +24%). So we will see.
China is much more hungry for gold then India. Thomson Reuters presupposes that the demand of China will overcome 860 tons this year which means that it overtakes India as the biggest gold consumer. It is presupposed that China is also one of the biggest gold producer with the estimation of overall production around 370 ton per year. Chinese demand consists mostly of jewelry industry, coins and bars. But India is not far behind China. The World Gold Council presupposes that demand will rise in India at the end of the year what is connected with the festival of lights next week. The first half of the year was weak but the second half will be much stronger. The WGC presupposes that Indians holds in gold approximately $800 billion. China and India dominate the global gold demand with tis combine share of 45 %.
There is more and more news concern the fraudulent behavior in the field of the gold market. Italy busts smugglers network which bought gold on the black market by laundered money and export it into the Switzerland. The authorities said that smugglers export more than 15 tons of gold out of the Italy. There is a similar story from Malaysia. The police revealed that they seized approximately 142 kg of gold from some companies involved in the gold market. They should have deceived a significant number of investors who have not received their purchased gold. “In some cases, investors were still waiting for their gold more than five months after payment”. So be very careful what you are going to buy and from whom.
January 1st 2013 will be a very important day for gold. Basel III regulations come into the effect which means that gold regain its status as TIER1 asset class which means that gold will receive a zero percent risk weight. Gold will be a part of official safe havens as are cash, claims on international entities and claims and exposures on some unconditionally guarantees by sovereign entities. These Basel III regulations could stimulate demand for gold from commercial banks in 2013 and following years.
Matúš Pošvanc, upner.com