Speculators pushed gold price down, but physical demand is hot: World Gold Council

Aram Shishmanian, CEO of the World Gold Council, released a statement Thursday blaming speculation for the gold price plunge and maintained that physical demand has roared back this week, indicating favorable long term fundamentals.

It has become increasingly clear over the course of the past week that the fall in the gold price was triggered by speculative traders operating in the futures markets. Their short-term view of generating a trading profit is in stark contrast to the views of long term investors in gold, as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Monday’s further decline.

Gold operates on the basic economic fundamentals of demand and supply. Our view is that demand is strong while supply remains constrained, and that this dynamic ultimately drives the long-term price of the metal.

While the press release may come as little surprise, the momentum of physical demand is Asia and the US has had an impact as gold was up $17.80 Friday morning.

Shortages in coins and bars are being reported in Dubai trading and premiums in India and China indicate that buyers are willing to pay more than current spot prices.

Gold was trading at $1,398.90 at noon EST Friday.


Sources: World Gold Council; Kitco News; 24-7 Wall Street