Gold Prices Gather Steam as Bullion Disappears From the Market

Written by Jason Simpkins
Posted February 6, 2014

Lower gold prices have spurred demand for physical gold, putting prices in position to rebound.

So says the founder and CEO of Asianomics Jim Walker, who is also one of the most informed analysts in the market.

"Physical gold is disappearing off the market at a terrible rate,” Walker told CNBC. “As soon as that really starts to hit I think gold goes through the roof. That's one of our biggest longs for the year."

Indeed, more and more analysts are suddenly turning bullish on gold.

In a recent research note, JP Morgan analysts finally conceded that “gold may be close to its cycle bottom while emerging and commodity currencies like the rand are depreciating against the dollar.”

Citigroup jumped in, too, moving its 12-month view on the mining sector to bullish for the first time in three years.

“Investor sentiment has hit rock bottom. The mining sector has moved through five stages of grief, namely Denial, Anger, Bargaining, Depression, and now we think we are in Acceptance that the sector has moved into a new norm,” said lead analyst Heath Jansen.

Another Citi analyst, Toby Lewis, cited rising demand in China, as the reason for the bank's about-face.

“We expect support for the gold price to be driven by Chinese physical demand increasing later in the year,” he said.

Indeed, Gold’s biggest slump in three decades has been a boon for Switzerland's MKS SA, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry.

Managing Director of MKS's PAMP refinery Mehdi Barkhordar credited China’s “insatiable” appetite for a 20% sales boost last year. And he's equally optimistic about 2014.

“The demand in China is off its peak, but still respectable,” he told Bloomberg.

Chinese gold demand reached 1,189.8 tonnes last year, a 32% jump over 2012 and a fivefold increase from 2003.

It's not just retail demand, either. China increased its gold reserves by 76% since 2009. The country now hold 1,054 tons, making it the third largest holder of gold reserves in the world.

And that's just one reason gold is coming back.

This is a development we've been telling you about for some time, and it's bound to continue.

So stay posted.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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