Gold News

3 Reasons Physical Gold Buying Looks Strong

DEMAND for Buying Gold in physical bullion form has rebounded in recent weeks, according to analysis from investment bank and bullion dealers Standard Bank.

Standard bank today reports "resurgence" in its Gold Physical Flow Index (GPFI), the bank's proprietary measure of worldwide physical gold bullion demand.

"There are primarily three reasons for this resurgence in demand," says Standard bank commodities strategist Marc Ground.

"The first [is] a weaker gold price. For Indian buyers in particular, this lower gold price has relieved some of the pressure of a weaker Rupee and a higher interest rate environment—prompting them to return to the market, after being noticeably reticent this past year."

Ground adds that much of this second reason, the recovery in Indian gold demand, has been down to Diwali, a festival traditionally associated with gold buying which fell in November, and may therefore only give transitory support for physical demand. But he notes that Indian demand "has only been part of the resurgence we have seen" in physical gold buying.

Sustained and strong demand out of South East Asia has also played a significant and more stable role in the physical gold market," says Ground.

"It is this buying, particularly from China, that we look to as one point of support for gold upon which we premise our view that dips below $1700 per ounce should be bought."

There are also signs that Western investors have been building their physical gold positions in recent weeks. In November the US Mint reported its best month for sales of gold coins since July 2010.

Here at BullionVault meantime our proprietary Gold Investor Index, which tracks buying and selling of physical gold on our online exchange, rose to a six-month high last month, a signal that self-directed individual investors have grown more bullish towards the metal.

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