The price of gold may be languishing, but investors should note that it is being held up by steady demand by central banks.
Since the beginning of 2010, central banks worldwide have purchased a net 789 tonnes of the precious metal to add to their inventories. In the first two quarters of 2012 they purchased about a third of that, 254 tonnes of this total.
However, even with this activity, demand is only just in balance with supply.
According to the World Gold Council data released overnight, overall world inventories of gold are changing very little.
Miners are raising output slowly, with quarterly releases to the market of about 700 tonnes.
Recycled (scrap) gold supply is on the soft side of 400 tonnes per quarter.
The jewellery market demand has fallen away over the past decade, but more recently is holding at about 400 tonnes per quarter.
Demand by investors for coin and bars has grown significantly since 2005, but is now fairly stable at around 300+ tonnes per quarter.
Demand by EFTs for physical gold to back their products has fallen away recently. In 2008/9 it was as high as 200 tonnes per quarter, but in the past year it has only averaged 60 tonnes per quarter. In the June quarter, these funds became net sellers, which is a surprising outcome.
Industrial demand remain remarkably steady at just over 100 tonnes per quarter.
All these supply and demand influences are in rough balance, but it is only the rapidly rising official demand that keeps it like that.
We maintain a daily review of the prices for coin, bars, bullion, and scrap and you can find that data here »
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