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https://www.citigroupgeo.com/pdf/SGL00570.pdf
Gold
Fun While Funds Flow
ƒæ Investor Demand Rules ¡X Surging investor demand is powering the gold market.
The market is expected to remain robust as long as economic and financial risks
remain paramount. But it¡¦s a crowded trade and fundamentals are not supportive.
ƒæ Conventional Investment Drivers Irrelevant ¡X The price strength is despite a lack
of support from conventional drivers ¡V a weak USD and inflation.
ƒæ Currency Risk, Deflation and Credit Risk ¡X Competitive currency devaluation,
deflation and the crisis in momentary conditions are driving the current bull
market, a situation comparable with the 1930s.
ƒæ Physical Investment Predominates ¡X The fear factor is reflected in demand for
investments as close to physical gold as possible ¡V coins, bars and ETFs.
Derivatives demand is less buoyant.
ƒæ Jewellery Demand Crushed ¡X High prices and economic recession are depressing
jewellery demand, especially in developed economies.
ƒæ Mine Supply Decline Continues ¡X Mine supply is still falling, and around 100
tonnes of production may be lost from copper mine closures.
ƒæ Price Outlook ¡X Prices are expected to remain well supported as long as the
economic and financial risks prevail. Further deterioration, and especially any sign
of inflation, could send the price much higher. But stability in the economic and
financial market outlook would likely trigger a sharp retreat.
ƒæ Silver Investment also Buoyant ¡X Especially from ETFs and physical. And mine
supply growth will likely be curbed, especially by zinc production cuts.
