The price of spot Gold has been rising since the beginning of the year, but is still down from the 2013 highs. A change in trend for demand in the precious metal might have your family heirlooms gaining value in 2014!
The release of 2013 data from the World Gold Council highlights some key changes in the price of Gold. Supply has declined, while Jewellery demand has increased at its best rate for 16 years. At a time when speculative investors have been buying up the bubble currency Bitcoins, the 2014 outlook for the price of Gold is showing great potential.
In 2013, China set a new record for jewellery, bar and coin demand at 1,065.8 tonnes, according to the World Gold Council with global demand back up to pre Global Financial Crisis levels (2008), at 2,209.5 tonnes. At the same time, global Bar and coin investment was the highest on record at 1,654.1 tonnes.
Is this spike in Demand an insight into investor fear?
Investors buy up Gold in times of fear on the premise that holding the precious metal is less Risky than holding other assets. Physical Gold can still be used to barter for goods and services, although when you are buying Gold futures contracts, or Exchange Traded Funds (ETFs), you don’t own the actual commodity directly.
The price of Gold started 2014 at $1,204.50 an ounce, closing at $1,310.80 on Wednesday the 19th February – a gain of $106.30 or 8.8%. The long-term high price for Gold was $1,923.70 on the 6th September 2011 after the precious metal had pushed sharply higher during the Global Financial Crisis.
Having consolidated at relatively low prices since July last year, changing demand and supply dynamics, as well as increasing fear over the Emerging Market performance for 2014, has the safety of Gold looking far more attractive.
Bitcoin Bubble Bursting … watering Gold for growth in 2014
Many speculative investors have been buying Bitcoins over the last year, forcing the digital currency to form a Bubble that has already started to burst. Bitcoin prices almost doubled from November 2013, but have plummeted into the end of the year as more news of scams and scandals hit the newswires.
As more and more concerns become apparent in the investing world, not only with Bitcoin, but with global stock markets, investors will turn to perceived safer investments. Bonds are not offering sufficient return, but Gold is at an attractive price.
The trend has started with Central Banks increasing their official gold reserves. Supply fell by 2% in 2013 as a decline in recycling outweighed production growth. All this adds up to a good potential for Gold prices to continually to grind higher through 2014.