JPMorgan Says Gold ETF Cuts Old News, China Buys Gold and Hoards

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Indian and Chinese consumers sure love their gold – and it doesn’t look like demand is slowing down anytime soon.

A recent report by the World Gold Council noted that gold jewelry, bar and coin demand in India alone was 70 percent stronger in the second quarter of 2013 compared to the same quarter last year.

In a recent interview, the managing director of WGC investments, Marcus Grubb, said that although the April-June 2013 quarter had recorded a drop in gold demand by about 12 percent, it was largely driven from the investment side. There was, however, “a very big recovery and rebound” in the jewelry market.

Global demand, up by 37 percent, was price-driven, and of course a lot of it was concentrated in the two largest markets, China and India, supported by strong jewelry performance by the smaller Asian countries, as well as Indonesia and Thailand. In the US, too, he pointed out, there was a second quarter of positive demand for jewelry, the first since 2005, because of some improvement in the fiscal situation there.

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Sharing the WGC optimism, a report in the Business Insider said analysts at JPMorgan, in an advisory to their clients last Thursday titled “Gold and the Denver play: Gold Shrugs Off the Paulson Sale; Buy the Bounce,” had pointed to several “bullish factors” for the shiny yellow metal (the ‘Denver play’ referred to the Denver Gold Conference usually held around this time of the year attended by large gold institutional investors).

In the advisory, the JPMorgan analysts said gold had shrugged off news that investment management firm Paulson & Co had cut its exchange-listed gold exposure in half, instead rising to $1,365/oz, perhaps marking an end to the 10-month, 25 percent fall in gold and 50 percent fall in gold equities.

In China, the economic slowdown of late has only whetted the gold-buying appetite of its people, who, contrary to the beliefs of economists, have turned to hoarding gold for any eventuality. A report in The Wall Street Journal said if the Chinese saw their economy headed the wrong way, they were likely to step up their purchase of gold as a bulwark against a depreciating yuan.

All this, say those whose business is to track gold, will only be good for the business in the months to come.

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