worrying demand trends?, page-8

PP

I agree with you.

In addition negative real interest rates are important, especially in the countries where gold is prized (India and China for example).

Last time Benny printed (QE2) he caused inflation in commodities around the world, especially soft commodities (at least that is what the press claimed). This led to high inflation in China/India etc where food is a very significant portion of expenditure. The high inflation in Chindia combined with low or negative real interest rates makes gold attractive form of wealth preservation. The alternative in China is to buy property, which is heading down in price.

A deflating property market in China could be a problem for gold as people are less inclined to speculate when their wealth is reduced. The Chinese need to stimulate the economy again or growth will be much slower than the 7.5% they are targeting.

High gold prices are not a certainty, but I have a lot of faith in central banks working overtime to keep the asset bubbles up out of fear what a massive decline of wealth would do to people's willingness to spend and keep economic activity elevated. At some point the negative interest rates in US/Europe/Japan and money printing will lead to a lot more speculation in gold.

But this a spec area and care has to be taken.

loki