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Overseas Markets Heating Up Action in Gold Bullion

May 18, 2012 - Overseas markets account for a considerable amount of the demand in the market for gold bullion, and after a brief reprieve these markets are again heating up in time to make the coming months very interesting for gold. This necessarily affects and impacts the US gold market, particularly because the United States is not the biggest market for gold in the world.

The biggest market for gold in the world is actually India, which has a societal relationship with gold spanning many thousands of years. Traditionally in India, wealth is stored in the form of gold, which is transferred upon both marriage and death in the form of jewelry. This makes India, which has over a billion citizens, the strongest and biggest gold market on the face of the planet.

Recently, increases in particular tariffs and taxes have brought the demand for gold down as India sought to make it more difficult to import gold and store gold in an effort to boost the economy. This has undoubtedly had an effect on the US gold market and will continue to do so.

However, one of the biggest trends in gold right now consists of an increase in gold bullion buying in China. Wealth, again, is stored in the form of gold in China traditionally, but Chinese workers are facing a scenario in which they have much more disposable income and they are poised to spend it on gold bullion.

Gold demand in China may surge as much as 30 percent this coming year, which will provide the boost China needs to overtake India as the world’s premiere gold market. Gold demand may rise to between 900 metric tons and 1,000 tons this year from 769.8 tons in 2011. This kind of significant increase in volume will certainly affect the US gold market, even as India drops from 900 tons to 800 tons.

The demand in gold is a major deterministic portion of the gold price, which is a dynamic we have seen at work over the past month and more. Demand overseas as well as domestically has simply dropped, which has caused a commensurate drop in prices. However, demand will again be rising, particularly in China where there is a larger amount of disposable income and the value of gold is socially and historically appreciated. The demand from Asia will eventually creep into American markets and drive the price of gold bullion higher.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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