Gold Coin Demand Exploding In Europe And China On Gold’s Price Lows

In June 2013, when the gold price touched its multi-year lows (just below USD 1,200), demand for physical gold truly exploded. It had been one of the reasons for which we remained believing that the gold bull market has not run its course yet, contrary to what mainstream economic and investment pundits tend to believe.

The ultimate test came two weeks ago, when gold touched again the same price level as in June. The gold price jumped quickly higher. The double bottom was not only a powerful technical signal, it was also confirmed in the physical market with another explosion in demand.

Bloomberg reported that the Royal Mint in the UK ran out of 2014 gold coins (“Sovereigns”). The mint expects to have stocks of the coins again by the end of January. The Royal Mint said in a statement: “Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating. The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.”

Daniel Marburger, director at Jewellers Trade Services in London, which buys and sells coins and bars, told Bloomberg: “Due to the low price level, we’re currently experiencing high demand. We also have a lot of companies restocking” coins at the start of the year.”

On the other side of the Atlantic, the US Mint reported sales of 56,000 ounces of American Eagle gold coins in December. That’s the highest sales since June. The Mint sold 14% more in 2013 compared to a year before. According to CoinUpdate, the US Mint anticipates that they will have approximately 3.5 million coins to allocate on January 13, 2014. They have indicated that allocated quantities for the following week will be much lower. The initial amount of coins available will be lower compared to the prior year.

The Perth Mint in Australia reported to have sold 41% more gold in 2013. In particular, sales to Turkey climbed 64% last month to the highest since July. Sales of gold coins and minted bars totaled 754,635 ounces in 2013 from 533,333 ounces a year earlier.

In the last trading week of December (23d till 27th of December) there were 53 tons of physical gold withdrawn from the Shanghai Exchange in China. In Gold We Trust reports that yearly total withdrawals total 2181 tons in 2013 (which is excluding PBOC purchases).

Want China Times wrote: “Many Chinese gold buyers have been happy to see the price drop as this is traditionally peak season for gold purchases before the Lunar New Year holiday and the recent slump will allow them to buy gold at relatively low prices. The sales had surged by at least 20% in December 2013 from a month earlier and were up by 15%, compared with the same period in 2012.”

Although gold demand is not correlating significantly with the gold price, it surely is a very strong sign that demand explodes when prices come down. The gold bull market is not over, the best is yet to come.

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