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Despite
prices rising 338%, global gold demand in 2010 was like the decade-long bull
run hadn't got started...
WESTERN SAVERS hoping to defend
their standard of living as global incomes converge take note.
Ten, even five years ago,
precious-metals analysts thought rising incomes in Asia would see gold
substituted for financial services or consumer goods. But China's private demand
has more than doubled as a proportion of gross household savings. Based on
the World Gold Council's latest data – issued today in the
market-development and research group's new Gold
Demand Trends report –
India's private consumption jumped in 2010 to a new all-time record of more
than 963 tonnes.
That's equal to 2.65% of GDP on
the IMF estimate. On BullionVault's analysis, it
equated to more than 11.5% of India's gross household savings.
Yes, the data are
subject to revision, of course. They can only ever be an estimate, too.
But for Western savers hoping to
defend their standard of living, it's plain commonsense to buy a little of
what Asian households are using to store ever more of their fast-growing
wealth.
Looking at today's Gold
Demand Trends report, you can
forget about central banks (net gold buyers in 2010 though they were, as a
group, for the first time in two decades). Don't dwell on
"safe-haven" Western demand either (other than to note how new ETF
demand and "unallocated" trading in the wholesale, off-exchange
market both slipped 45% from 2009's record highs, while coin and bar demand
surged worldwide). Indian and Chinese private households are the knock-out
story from 2010's data. The Indian figures in particular beggar belief.
The world's two most populous
nations, its fastest-growing major economies, and numbers one and two for
physical gold buying, both India and China set new records for private gold
demand by value and volume in full-year 2010. On our reading of the new World Gold Council data, per capita consumption also set fresh records in the top two demand
countries.
Rising inflation and sub-zero real
rates of interest are setting the pace, just as they did during gold's
developed-world bull market of the 1970s. Productivity and real wages are rising, however, in sharp contrast to the economic path
the rich West took four decades ago. So Asia's deep love of gold – and
ever-deepening pockets – suggest a different path, perhaps, from the
post-bubble slump which gold prices suffered amid the record-high interest
rates paid to cash savers to defeat Western inflation at the start of the
'80s.
Developed-world gold investment
rose amid the financial crisis starting 2007, even as world jewelry demand sank. Emerging Asia tempered and even
reversed its buying as global GDP turned down, with private consumers in
India – a net importer every year since the Great Depression (the
world's No.1 consumer has got virtually no domestic mine output) –
actually becoming net exporters of gold in the first quarter of 2009.
The economic rebound, so much more
pronounced in emerging Asia than the rich West, has seen those trends switch
over. Because even with the Eurozone deficit crises
driving a jump in physical demand for gold bars and coin (particularly in
Germany), net demand for new units of gold ETF shares actually slipped 45%
from 2009's record. So too did "unallocated" trading in London's
wholesale market.
You've got to go a long way to
over-state the strength of physical gold demand in 2010. The Dollar price
rose 26%, but total global demand still grew 9% by volume, hitting its
highest tonnage since the long bear market of the 1980s and '90s hit
rock-bottom in 2000.
Gold then averaged $279 per ounce,
rather than 2010's average of $1224. Yet in tonnage terms, global physical
demand – led by emerging Asia's big giants – was like the bull
run hadn't even got started.
Adrian Ash
Head of
Research
Bullionvault.com
You can also Receive your first gram of Gold free by opening an
account with Bullion Vault : Click here.
City correspondent for The Daily Reckoning in London, Adrian Ash is
head of research at BullionVault.com – giving you direct access to investment
gold, vaulted in Zurich, on $3 spreads and 0.8% dealing fees.
Please Note: This article is to
inform your thinking, not lead it. Only you can decide the best place for
your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on
it.
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