If Gold Demand Is Up, Why Are Prices Still Down?

Gold is not behaving in an historical manner

   

If Gold Demand Is Up, Why Are Prices Still Down?

Demand for gold grew 16% over the past 12 months to 1,098 tonnes, according to the World Gold Council’s Q1 2012 Gold Demands Trend Report. Globally speaking, that translates into a tidy sum of $59.7 billion in gold.

While 16% growth is impressive, today’s gold prices are still around 18% lower than their 52-week high. Why the discrepancy?

The May 5 trading session was the first in a while that gold has bucked the trend by going up when the S&P 500 (NYSE:SPY) and Nasdaq-100 (NASDAQ:QQQ) are down. Over the past several months, gold has traded in tandem with volatile assets like stocks (NYSE:SCHB), industrial metals (NYSE:JJM), and oil (NYSE:OIL).

On the demand side, the gold market (NYSE:IAU) has long relied on India (NYSE:INDY) for consumer buying, but the threat of bans on imported gold could stop that.

China figures to become a bigger player in the gold market. China increased its gold holdings in Q1 to a record 98.6 tonnes, up 13% from Q1 2011. Can China be counted on to boost gold demand higher?

Chinese stocks (NYSE:FXI) have lost 17.56% over the past three months and China’s real estate bubble (NYSE:TAO) is quickly deflating. Will Chinese money flood into gold and push prices higher?

Europe’s sovereign debt crisis (NYSE:FXE) adds another monkey wrench into the gold demand/price equation. Will Europeans start liquidating their gold to raise cash?

The ETF Profit Strategy Newsletter via its Weekly ETF Picks explains what’s behind gold’s demand/price discrepancies and how to be on the right side of the market. The right gold strategy begins with clearly identifying support/resistance indicators along with strict trading discipline. No major rally or sell off happens without taking out key support/resistance levels.


Article printed from InvestorPlace Media, http://investorplace.com/2012/05/if-gold-demand-is-up-why-are-prices-still-down-spy-qqq-jjm-schb-oil-iau/.

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