Expansionary monetary policies are not easing but accelerating worldwide, thus destroying the value of money leaving gold as the prime store of wealth in the medium to long term.
Citing the expansionary monetary policy being followed by most Central Banks, Japan’s policy becoming significantly more so following recent announcements, and the Mario Draghi statement yesterday which emphasised the downside risks to the Eurozone economy and implied further extension of the ECB easing programme, Germany’s Commerzbank analysts see gold as being in strong demand in the short to medium term.
The analysts note also that, contrary to some reports, India appears to be seeing high gold demand levels, noting a statement from the former chairman of the All India Gems and Jewellery Trade Federation that Indian gold imports in the March quarter were running at around, or higher than last year’s 228 tonnes and anticipates imports increasing some 30% year on year in the current quarter as wedding season demand kicks in. India’s seemingly insatiable demand for gold appears to be continuing despite government efforts to try and make it less attractive to help solve the country’s balance of payments deficit. Demand appears to have been further enhanced by the drop in the gold price which is trading some 13% lower than its recent high in November last year.
Emphasisisng the connection between expansionary monetary policies and gold, writing today on Mineweb, specialist gold analyst Julian Phillips, comments “For so many fundamental reasons people all over the world buy gold for the very long term, not least that it is money in bad times. It is liquid in bad times. It is exchangeable all over the world. Enemies trust in it when they don’t trust each other. It is said that people don’t buy gold to make money, but buy gold because they have money.”