Investment in gold ETFs and ETCs continues to rise and physical gold demand remains in the West strong, although traditional gold markets in the Middle East and India are showing sharp downturns in trade as higher prices and the global financial situation are taking their toll.
The largest of the gold ETFs, the SPDR Gold Trust (GLD) has just stated that it now holds 787.88 tonnes of gold on January 7th. This continues an increasing level of gold holdings on each reporting day over the past month and is yet another new record.
Meanwhile the smaller London-quoted ETF Securities also said that in the week to January 2nd its gold holdings backing its Physical Gold exchange-traded commodity PHAU.L rose 2 percent to 59.87 tonnes as against 57.73 tonnes a week earlier.
But in the traditional gold-buying areas of the East and Middle East it is a bit of a different story. Both Dubai and Abu Dhabi reported huge falls in gold jewellery sales in December, and sales have been weak in India, the world's largest market, as higher gold prices in rupees have dampened local interest.
Reports say that some momentum has been taken out of the gold market due to much lower imports of gold in December into these areas Traders said that news of sharply lower bullion imports by India, Turkey and the Middle East has taken a toll on momentum in the market.Perhaps most worrying for the gold market is that India reported imports down a huge 81 percent in December year on year and 47 percent over the whole of 2008 as higher price levels and the beginnings of a decline in the general economy affected demand.
So far these reports do not seem to have moved the market adversely suggesting that the rise in western investment in physical gold as a store of value is gaining sufficient strength to counter the falls in demand in the traditional buying areas. There is also the suspicion that if prices are seen as holding current levels, or increasing further, then the Eastern markets may pick up again. The volatile movements in the gold price of late have had prospective purchasers holding off in the hope that the price will fall back again.