Scrap Gold Sales Are Sluggish

August 6th, 2009 admin

In their various analyses, gold market forecasters and commentators often tend to overlook the basic market fundamentals and get carried away by short-term trends and sentiments usually associated with speculative investment.

Whether it is by design or by accident is difficult to call.

Recent price movements in the international gold market strongly suggest that hype about investment demand has failed to cause gold prices to breach the psychological $1,000 an ounce.

This is one reason why a note from the world’s foremost precious metals consultancy GFMS is important. Gold scrap sales and jewellery fabrication, important elements for analysing the gold market fundamentals and price outlook, often get unfairly ignored by market commentators who sometimes portray the gold price as solely a function of what is happening in the investment arena, the consultancy said.

“This was amply demonstrated in the first quarter of the year when western investment soared to over 700 tonnes, or more than four times the volumes of the same period a year earlier; yet, the price failed to breach the $1,000 an ounce mark, let alone establish fresh record highs,” it added.

Clearly, scrap gold sales expanded and jewellery fabrication slumped in the physical market during the period. This generated an unusual situation of major importers, fabricators and consumers such as India, Italy and Turkey undertaking export of surplus bullion to the world market.

Obviously, not all demand-side (physical demand through jewellery fabrication) and supply-side (scrap sales) factors are being closely considered by experts.

Entry Filed under: Investment Infos