As gold plunged to a five year low physical demand for bars and coins has surged. The Perth Mint reported a spike in sales as retail investors rushed to take advantage of the latest price decline.
Increased demand for jewellery in China and India, the world’s largest consumers has led to physical shortages and premiums to double. This weeks surge in China is a welcome sign as interest in the yellow metal had declined as investors had switched their focus to a surging stock market.
Only in a market where the price is dictated by Comex driven selling can physical demand rise and the price decline.
Increased physical demand will help to support the gold price as the bearish outlook continues. The yellow metal has taken a battering in recent weeks amid growing expectations the Federal Reserve will raise interest rates later this year. Many in the gold community doubt the Fed will ever raise rates and if they do it will be by a token 0.25%. If the Fed does raise the cost of borrowing they run the risk choking off an already fragile economic recovery.