I don’t really care on whether the physical gold is actually in the Gold ETF’s, rather I like to look at it as an important indicator that shows us how much investor fear there is in the market. Moreover, with the amount of leverage and debt now in the system, when the market crashes this time around, it will push gold investment demand up to a record we have never seen before.
The chart below shows the amount of physical global gold investment demand over the past 14 years. As the gold price increased, so did amount of gold bar and coin demand:
As we can see, during the U.S. Banking and Housing Market crash in 2008, gold bar and coin demand doubled to 868 metric tons (mt), up from 434 mt in 2007. That was quite a lot of gold bar and coin demand as it totaled nearly 28 million oz (1 metric ton = 32,150 oz). Furthermore, as the gold price jumped to $1,571 in 2011, gold bar and coin demand shot up to nearly 1,500 mt (48 million oz).
Now, the reason for the huge spike in physical gold investment in 2013 was due to the huge price smash as the gold price fell from nearly $1,700 in the beginning of the year to a low of $1,380 by the middle of April. Investors thought this was a huge sale on gold so demand for bars and coins reached a new record of 1,716 mt.
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