Gold Investment Report – 2009 Second Quarter

July 24, 2009

The World Gold Council is out with their latest Gold Investment Digest, providing an analysis of gold for the second quarter. The most notable aspect of the report is the incredible slow down in investment demand experienced during the quarter.

During the second quarter, the price of gold rose from $916.50 per ounce to $934.50. This slight gain compared to much larger gains in major world stock markets and the Dow Jones Commodity Index. Gold had reached a peak price of $981.75 during the quarter before moving lower.

Investment demand for gold showed a big decline from the previous levels, but remained positive. For the second quarter, Gold ETFs showed inflows of 46 tonnes. This compared to inflows of 459 tonnes during the first quarter.

Sales of coins and bars started the second quarter very strong before tapering from May onwards. The report also notes the decline in margins on coins and bars as availability constraints eased. As I have noted in some of the monthly bullion sales reports, although sales have shown month to month declines, levels remain far above year ago levels.

While some have pointed to the recent slow down in investment demand as evidence that the so-called "new gold rush" is over, I think this call is premature. During the quarter world stock markets and sentiment about the economy rebounded from the depths of despair to the current "don't worry be happy" mentality. Despite the shift, gold investors have remained patient and continued overall accumulation of the metal. The allure of an investment which has delivered positive annual returns for eight consecutive years, compared to the perpetual boom and bust of other asset classes, seems to have an enduring appeal.

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