Dissecting Gold’s Worst Plunge In 100 Years

August 15, 2013

The divergence between physical and paper demand couldn’t be more stark, according to the World Gold Council's quarterly report.


[This article previously appeared on HardAssetsInvestor.com and is republished here with permission.]


The second quarter of 2013 saw the worst performance for gold in close to 100 years as prices plummeted by 23 percent. The fear in the market at the time was palpable. But what exactly was going on in the market at the time? The latest Demand Trends Report released today from the World Gold Council sheds some light on one of the most volatile periods in the yellow metal’s history.

Overall Gold Demand Changes

According to the WGC, overall gold demand fell by 118.3 metric tons, or 12 percent, from a year ago, in the second quarter. But the drop was by no means across the board. In fact, there was a stark contrast in the performance of the various gold demand categories.

Jewelry demand, for example, was up by 154.7 metric tons, or 37 percent, while bar and coin investment demand (what some call “physical investment demand”) jumped by 221.7 metric tons, or a whopping 78 percent.

As we wrote earlier this week (see Selling By Western Investors Can’t Hold Down Gold Prices For Long As Asian Demand Surges), physical investment in gold is dominated by two countries—China and India. The Asian duo accounts for roughly half of global gold demand.

In an interview to published on HardAssetsInvestor later this week, Marcus Grubb, managing director of investments at the WGC, told us that both China and India may see their demand rise to 1,000 metric tons each this year. That would be a record for China and a near-record for India.

Gold Demand


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