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High Volume of Physical Gold Purchases

Written By Brian Hicks

Posted January 24, 2013

It seems there’s a lot of physical gold buying going on, with Southeast Asia as a particularly active player, per reports from Standard Bank Plc.

The bank’s Physical Gold Flow Index indicated that demand has skyrocketed to its highest point since November last year, with a four-week high reached on January 17 in London, at $1,696.28/oz.

Much of this could be attributed to stronger-than-usual festival season buying throughout India, where the festival season lasts through the final months of a year.

India just recently raised import taxes on gold in an effort to control demand as well as to bring down its current-account deficit. But in the days prior to that announcement, gold shipments had increased in anticipation of just such an increase in taxation.

Bloomberg reports:

“It was strong in November and that’s normally a usual seasonal pattern that we see coming through from Indian post- monsoon, wedding season buying,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg, said by phone yesterday. “The fact that January is as high as we see in November usually, that’s unusual. There was probably some Indian buying ahead of this tariff increase.”

Over this year, bullion for immediate delivery has gone up to $1,687.57, or an increase of 0.7 percent. Throughout last year, gold increased 7.1 percent, driven largely by stimulus actions undertaken by banks around the world.

That wave is still continuing, with the Bank of Japan recently announcing its own stimulus program (it will buy around $147 billion in assets per month until inflation nears 2 percent, beginning January 2014).