Source Robin Bromby | May 21, 2009
Article from: The Australian
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WHEN a figure pops up that shows that gold sales in the Middle East dropped by 26 per cent in the first quarter (year on year), and another follows shows gold use by the jewellery sector is the lowest for 20 years, it would be easy to conclude that the gold bears are right.
But hold your horses. If you go further down the latest statistics from the World Gold Council you read that gold sales in the first quarter, compared to the same period in 2008, were up 38 per cent to 1016 tonnes. The Middle East figure should also be seen against the fact that gold sales in the Gulf and surrounding countries are heavily dominated by the sales of gold jewellery with gold for investment far less important. So, why jewellery sales are tanking due to the financial uncertainty, gold bars and coins are selling like hot cakes - also because of the global financial uncertainty.
Gold as an investment, rather than adornment, is the story. More and more investors want some gold just in case Washington (and London, Brussels, Beijing and Canberra) don't get the rescue right.
Another report overnight that feeds into this trend concerns a company based in Frankfurt with a rather novel idea. Reuters says that TG-Gold-Super-Markt is planning to install 500 automatic teller machines across Germany, Switzerland and Austria that will spit out, not euro notes, but pieces of gold. Put €31 (at yesterday’s price) in the slot, and you can withdraw one tiny, 1 gram piece of gold. Each ATM, the first of which was on display at Frankfurt’s main railway station, will hold 1g, 5g and 10g gold pieces as well as Krugerrand coins. The ATMs will be able to vary the price of the gold in line with the changing gold spot figure. <snipped>
Jewellery manufacturers slow up on buying when Gold is high, hoping for a drop to resume buying Gold for manufacture again probably.
So if the Gold price stays high sooner or later the jewellery manufacturers will have to resume buying and increase their prices.
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