Barring any major disruptive events, IMO the GP will hold a relatively narrow range around its present price until China decides otherwise. They have the purchasing power to chase gold at a faster rate, but are content to hold a price close to average global production costs. There is now a measure of stability in the price demand equation, which looks controlled to me. Whether Russia continues to buy, the Swiss decide to buy, or Indian demand ebbs and flows, the elephant in the room is China.
IMO Its important to remember that most of the gold held by other nations, particularly Western ones, is historically held gold, but China is very late to the gold table, and is in a race to catch up, and I believe, to build the world's largest gold hoarding. So it's a fine line they tread. They want the gold "yesterday" to achieve their ambitions for a strong internationally tradeable yuan, and to be in a strong position when the next Global financial crisis arrives. But keeping the purchase price as low as possible is important also to maximise the quantity of gold purchased.
23
