Gold Update April 2012
23 April 2012
Gold Update April 2012
Bullion market remains strong
As
the financial year closes, New Zealand Mint’s Mike
O’Kane tracks gold’s progress
Despite new confidence about improving global economies, gold remains popular across the three major markets.
US
market
Overall the US market for gold is still
strong, up year on year, but down from its record high of
USD$1920 in September and November last year. While the
market and economy remain muddled, and talk of recovery is
tempered with results that show otherwise, pricing will
remain underwhelming and volatile.
Physical demand is stronger, with many citizens looking to hold gold as a safe haven or as an insurance policy for their portfolios. Compare this with 2009 - 2010 where in the US Gold brought 10% growth and real estate 0.74%
US Markets in
summary:
• QE3 – speculation is rife
whether QE3 is on or off, with current attitudes changing as
regularly as socks. The past few years have seen strong
growth in USD$-denominated gold as investors anticipate
inflation due to Fed’s tactic of “kick-starting” the
economy by printing money. That’s generally considered
positive for the long term outlook for gold
•
“The US economy will continue to recover only gradually
and labour market slack will remain substantial for a number
of years to come,” the Fed’s vice chair Janet Yellen
said last week at New York University.
• Jobs
data has come out worse than expected in the most recent two
reports, not what is required for a recovering economy.
EURO Zone
In Europe, issues remain around
potentially defaulting nations such as Portugal, Italy,
Ireland, Greece and Spain continue to haunt markets thus
underpinning gold’s safe haven status.
Fundamentally, confidence is weakening in the ability of
these nations to lower deficits and become financially
stable over the medium term. That leads to a weaker Euro
against the US Dollar.
The alternative currency in this
mix is gold and it appreciates as investors move away from
the troubled currencies. However the trend is tempered by an
appreciating US dollar which makes the Greenback more
attractive to many investors and weakening demand for gold.
The upshot of all this is that both currency and gold markets are pretty volatile.
Brazil, Russia,
India, China et al
The BRIC Nations are a bright spot
with the strengthening of their economies during the most
recent decade and as a result gold demand as an investment
has escalated.
In China, 10 years ago growth in the gold price was zero – now the People’s Republic is the second largest physical gold market in the world, just behind India. Whenever demand in either of these nations decreases, it is felt around the world. A good example of this is the recent general strike by Indian jewellers in response to an excise duty on unbranded jewellery and doubling of the import tariff to four per cent.
The strike has resulted in US$4billion in lost revenue and the consequences have been felt globally as the gold price has “capped” because of weak demand for physical gold. The strike was recently called off, but there has been no noticeable change as the tariffs remain in place until May when the Indian Parliament reviews it again.
About New Zealand Mint: New Zealand Mint has been minting legal tender commemorative coins, gold bullion and medallions for more than four decades. As New Zealand's only precious metal mint and one of the first world mints to adopt the .9999 standard for gold coin purity, New Zealand Mint prides itself on high quality design and production work. In 2009, New Zealand Mint opened the Bullion Exchange, the first of its kind in New Zealand which offers a comprehensive service for buying and selling gold and silver bullion as well as on-site insured storage. Leading the way with innovative, coloured, silver and gold commemorative coins, New Zealand Mint is known globally for quality and design excellence. New Zealand Mint also produces several ranges of jewellery that cater to many tastes and styles, including the Boh Runga and Trelise Cooper for New Zealand Mint collections.
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