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Gold Crash and the Demand for the Physical Metal

Gold has recovered from its recent sell off when concerns were inflating that the Central banks around the world will start selling gold. Bargain hunters globally started to stack up on this opportunity, which derived the demand for the physical gold to a record high in some areas. Even today, there is a shortage of physical gold which is pushing the premium on gold bars to $3.50 an ounce.

 

Biggest consumers of Gold

China and India without any doubt has been the biggest consumers of gold, with India occupies the number one spot.  According to the World Gold Council, the two countries together, account for more than a third of global demand.

 

Chinese Economic Data and Gold 

As the Chinese economic data gains strength, so does the demand for gold. Only recently the net flow of gold from Hong Kong increased to 223.52 tonnes in March from 97.11 tonnes in February, Reuters reported. Most of this was down to strong demand in China, as the country produced 403 tonnes of gold in 2012 but, consumed 832.2 tonnes.

 

 Festival Season Impacting the Demand

The second biggest gold buying festival Akshaya Tritiya started this week in India, as the biggest gold buying festival in India is Dhanteras. The wedding season is going to start in full swing in July also which will be pulling up further demand for the physical metal.

 

Chow Tai Fook, the world’s largest jewellery retailer by market value confirmed that they experienced heavy traffic at in their jewellery shops in China during the May Day holiday. The holiday season also encouraged the Chinese travellers to travel to Hong Kong which increased the gold sale to 40 tonnes only from 29th of April till 2nd of May. The demand was at such a level that some banks in the country had to ship more gold from London and Swiss vaults, Reuters reported.

 

Selling Pressure is coming

However, in Indonesia and Thailand this demand has started to subside, as the selling pressure in recent few days started to mount.

 

Hedge Funds and Gold

John Paulson a legendary hedge fund manager who made billions during the housing market crash is the biggest loser on Wall Street during the recent gold crash. Hedge fund billionaire Paulson lost 27% during the two week stretch of gold slide from its $700 million fund, and he has lost 47% from this fund year to date, Reuters reported. According to the regulatory filing, Paulson’s hedge fund was the biggest holder of the SPDR Gold ETF, with 21.8 million shares in the year 2012. However, since then, the most recent update on his position in this ETF has not yet been disclosed

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