Gold Currents Might Turn Trends
Fortune’s David Meyer writes, “More people are now searching online for how to buy bitcoin than they are searching for how to buy hold,” according to Google Trends. Gold is the classic hedge against stock market volatility, especially during downturns.
That might be changing if Q3 figures are to be extrapolated into a full-fledged movement or current.
It certainly doesn’t help to have a booming stock market at the moment along with a new commodity asset in cryptocurrencies. Leaving out the entirety of the legacy markets, bitcoin alone has appreciated many hundreds of percentages in just 2017.
“Demand for gold slumped to an eight-year low in the third quarter,” Mr. Hume reports, attributing the record fall to “the prospect of higher US interest rates and tighter monetary policy” which “resulted in less [gold] buying from institutional investors.”
Gold demand falls 9% to 915t in Q3 as ETF inflows slow from unprecedented highs in 2016, the latest World Gold Council report of 8 November 2017. It “showed demand for bullion fell to 915 tonnes in three months to September, down 9 per cent from the same period a year ago.”
“The latest figures were hit by ‘significantly’ lower inflows into gold exchange traded funds, which fell to 19 tonnes from 144.3 tonnes, and a softer jewellery market in India,” Mr. Hume detailed. (India is second only to China in gold consumption).
The “world’s biggest consumer of gold after China — dropped 25 per cent year-on-year in the quarter to 114.9 tonnes,” Financial Times notes.
Quoting Mr. Hewitt, “It was a tough quarter for gold demand,” and, paraphrasing again, “Mr. Hewitt said net inflows had remained weak during October with just three tonnes added to ETFs as investors chased higher returns from assets such as equities and bonds.”
Central Banks are the Health of the State
And here is the a-ha! moment: Mr. Hewitt anticipates gold’s rebound due to “buying from central banks. Led by Russia and Turkey, central banks added 111 tonnes to their gold reserves in third quarter, 25 per cent more than in the same period in 2016,” Mr. Hume claims. Quoting Mr. Hewitt approvingly, “We now have another central bank that is buying 10 tonnes a month,” in reference to Turkey. “That’s a significant development that hasn’t been picked up by people looking at the gold market.”
Things have become so desperate in the gold market, the metal’s heroic past of taming governments, of spiting them, has given way to alms: hands out, begging for central bank acceptance.