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Gold – State of the Market

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Gold 400 oz Bars

The World Gold Council’s annual demand trends study for 2014 are out and they show that there has been a very painful readjustment for the gold market after a record-breaking 2013 where 880 tons of gold was liquidated from the ETF area.

The overall demand slipped 4% to 3,923 tonnes last year in 2014 with jewelry demand falling 10% to 2,253 tonnes compared to 2013. Technology demand continued its long-term decline as well, dropping to an 11-year low in 2014. Investment demand managed to eke out gains of 2% for a total of 904.6 tonnes during the year. Still, there is a decline in output as there should be. We need to see new supply drop sharply setting the stage for a major low. Typically, production expands at the top and results in the over-supply that helps to send any commodity crashing down. Likewise, at the lows, you typically will see mine closures and this is necessary to rekindle the market once again.

There has been some central bank buying largely as a diversification because of the crisis in the Euro that has led to the dollar becoming a de facto currency of the world regardless what people think or would like to believe.