One of the main reasons for the intensive mining of gold is that it is a rare metal. As of today, this shiny yellow commodity exists only in a quantity of 165,000 metric tons. If all of it were put together, you would only get a pure 24K gold cube of 20 meters. Hence, the demand for buying gold rises globally. It is widely used in jewelry by many ethnic groups, with India and China taking the lead, with 60% of their gold used for jewelry.
But other demands for gold are for investment, for central bank reserves and for technology. Each sector has different dynamics driving the demand for gold, which adds to the strength and independence of the gold market.
There is no boundary when it comes to the supply of and demand for gold. The broad geographical utilization of gold gives it the stability which no other commodity enjoys. As it is a limited commodity, recycled gold is one third of the current gold supply. In fact, central banks have converted from being net gold sellers to net gold buyers. This causes a significant drop in supply and a corresponding increase in demand.
With such an interest in gold, there has been a great deal of research and intensive tracking of gold as regards its performance and its impact on the world markets.
The World Gold Council set up its Gold Demand Trends resource to gather data on global gold demand. It also has an analysis division, the Gold Investment Digest (GID), to analyze the historic performance of gold and its performance relative to other global financial assets. GID reviews the primary macroeconomic factors which drive gold’s performance and identifies the preliminary trends on its demand and supply.
There are four areas investigated by GID:
Price trends
The price of gold, as well as its volatility, is compared to multiple currencies and other worldwide financial assets, including liquid assets. These trends are identified and reviewed.
Investment trends
The trends of active investment markets related to gold are noted. These investment markets include futures and options, ETFs, and other over-the counter commodities.
Economic trends
There is also an analysis of macroeconomic factors which can highly influence gold’s performance at any time.
Gold market trends
The statistics on gold demand and supply are published and discussed based on current preliminary gold trend reports.
It is expected that the price of gold will go up in 2011, as Marcus Grubb, the Director of Investment at the World Gold Council, expects a stronger demand for gold by the central banks due to inflation hedging. This is not without reason as gold prices have risen for ten consecutive years, driven by demand in key sectors and continuous uncertainty in the global economy. A strong performer with a low volatility, gold has proven to be a strong foundation for investment in a well-diversified portfolio.
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