Despite record-smashing prices, world gold demand is expected to remain robust.
That means consumers are adapting to higher gold prices.
It also suggests that investors are still optimistic the yellow metal will reach its inflation-adjusted high of over $2,500 an ounce as world gold production levels remain stagnant.
Some even say that gold could reach $8,000-$10,000 an ounce; that means at the current level of about $1,350 an ounce, the bull market might only be less than 14% complete.
And in just a second, I’ll tell you exactly how to squeeze the most from your gold investments in this bull market…
World gold demand to remain strong through 2010
The global demand for gold is expected to remain vigorous throughout the rest of the year for three key reasons:
- Robust demand for gold jewelry in Asian markets;
- Strong gold investment demand as a result of economic and paper currency concerns.
- Heavy industrial gold demand for consumer electronics; and
Gold jewelry demand is expected to increase approximately 11% this year despite record-breaking prices, lead by buying in India.
In fact the demand for gold jewelry in India during the first three quarters of this year have already exceeded last year’s level. And the fourth quarter will offer seasonal support as Indians celebrate the traditional gold-buying festivals of Diwali and Dhanteras.
Robust jewelry sales demonstrate the fact that consumers are becoming accustomed to higher price ranges. This could mean a new long-term price floor for gold above $1,000 an ounce.
Increasing demand for gold for industrial applications also indicates a new price floor for gold.
Industrial gold demand has returned to long-term trend levels and is expected to remain strong as economic growth in key markets such as India and China drives demand for consumer electronics.
Meanwhile, the increased prevalence of consumer devices with gold components — like smart phones and notebooks — is supporting demand for gold in the electronics sector.
Gold’s distinctive and reliable properties of conductivity, malleability, and resistance to corrosion ensures it will be the material of choice for many new industrial applications in the future.
For the year, the total demand for gold for industrial use is expected to increase by as much as 15%, lead by an anticipated 20% growth in gold demand for consumer electronics.
Meanwhile, global fiscal imbalances and currency tensions have been (and will continue to) supporting investment demand for gold, spearheaded by demand for physical gold among retail investors.
Investment in gold will likely be sustained with the recent additional $600 billon of quantitative easing in America and consequent weakening of the U.S. dollar.
Investment demand will also continue to be buoyed by speculation of rising gold prices, as demonstrated by the strength of buying on recent price corrections and increasing awareness of gold’s investment qualities among retail investors.
These factors will trigger fresh demand for gold in the coming months.
For 2010, investment demand is expected to increase with demand for gold bars increasing an estimated 123%.
While the demand for gold continues to rise across many sectors, mine production remains flat after falling annually since 2001…
In the past 12 months, gold supply from mining has only been able to increase a meager 3% despite efforts from miners to ramp up production to take advantage of rising prices.
Rapidly increasing demand and stagnant mine production levels may lead to a deficit in global gold supplies, ultimately leading to significantly higher gold prices.
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Editor, Wealth Daily
Investment Director, Hard Money Millionaire and Underground Profits