LAWRIE WILLIAMS: Gold: ETF inflows and central bank purchases offset weakness elsewhere

While the quarterly Gold Demand Trends reports from the World Gold Council (WGC) are often slightly outdated by the time they are published, they always contain some exceedingly interesting and informative data which is still relevant to the overall position of gold in terms of supply and demand for the yellow metal.  The latest such report, covering the July to September quarter, recently published, is no exception.

According to the WGC the highlighted take-aways from the latest report, with clickable links to the relevant areas of the report,  are as follows:

All in all something of a mixed bag erring on the positive side as long as the levels of ETF purchases and central bank buying can be maintained.  So far they have shown little signs of a slowdown.  

None of the above will come as any surprises to readers of my articles on the Sharps Pixley site and I still remain positive on the overall direction for the gold price this year and next, despite a recent sharp drop and only partial recovery.

Speaking of which, these price take-downs particularly suit those who do not wish to see a rising gold price. This includes many governments and central banks which see a rising gold price as an overt condemnation of their economic policies and a directly visible contradiction of the positive picture they try to present the general public.  It is perhaps worrying for all of us that there are close links between the various regional Feds and the major bullion banks which hold major shareholdings in them.

We are a little confused by the recent sharp gold price fall which appeared to be based on a positive non-manufacturing confidence index release in the U.S. coupled with some somewhat spurious comments on the U.S./China trade talks.  The non-manufacturing index rise was in direct contrast to some other much more negative data on the manufacturing sector and the real state  of the U.S. economy which may not be quite as positive as the Trump Administration would have people believe.  After all an election year is coming up.

Re the U.S./China trade talks, we feel the announced Phase 1 ‘trade deal’ is really something of a non-event and is purely designed to present a positive picture at both ends without any progress at all on the major differences between the two superpowers. The ‘trade dispute’ will likely run and run and once the general public realises that there is likely no end in sight for the principal issues at stake, gold will likely receive a sharp boost.  But disinformation - fake news as defined by President Trump - is rife from all sides, so pressures will likely remain as long as the Fed and the U.S. Administration can continue presenting positive pictures.

07 Nov 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com