Gold buyers like a good deal
The early-year rally in gold may have sapped demand from physical buyers.
A survey released by the Gold Fields Mineral Services today showed gold demand down 29% in the first quarter to 781 mt, down from 1,097 mt in Q4 2015. They noted especially weak demand in China and a 56.3% drop in Indian gold consumption compared to the same quarter a year earlier.
A chart of gold prices doesn't accurately reflect the pain for some emerging market buyers. The drop in local currencies compounded the pain, and sapped demand.
The slump in physical demand was counteracted by an inventory build of 330 mt in gold ETFs.
There are two ways to look at it; either the physical demand will stay low and investors will quit, or physical demand will inevitably return as buyers adjust to higher prices.
For me, the ETF demand is psychological. If prices start falling, the gold bugs jump ship quickly. A trigger could be a hawkish Fed.
