There are essentially three demand flow There are essentially three demand flow avenues for gold and other precious avenues for gold and other precious metalsmetals. Do you know what they are? This . Do you know what they are? This week, we will have a look at week, we will have a look at Gold Bullion Gold Bullion ReportReport to see why it's said "Everything to see why it's said "Everything Old is New Again" and find the answer for Old is New Again" and find the answer for the above question.the above question.

Gold MarketGold Market- Everything Old is New - Everything Old is New

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As reported, high prices in precious As reported, high prices in precious metals command a lot more than just metals command a lot more than just investor and media interest. Since investor and media interest. Since prices started trending higher, it seems prices started trending higher, it seems as though there have been surges in as though there have been surges in the number of small shops and stores the number of small shops and stores looking to buy gold as well as TV looking to buy gold as well as TV commercials pushing “cash for gold” commercials pushing “cash for gold” services through the mail.services through the mail.

To anyone who care about To anyone who care about Gold investmentGold investment, this will be valuable , this will be valuable information to note. WGC (The World information to note. WGC (The World Gold Council) recently released its gold Gold Council) recently released its gold demand trends issue for 2010. Overall, demand trends issue for 2010. Overall, the annual demand for gold was up about the annual demand for gold was up about 9 percent. This ten-year high was 9 percent. This ten-year high was ascribed to net buying from central banks ascribed to net buying from central banks and demand from Asia, with “strong and demand from Asia, with “strong growth” in jewelry demand tipping the growth” in jewelry demand tipping the scales. scales.

It is reported that jewelry saw a 17 It is reported that jewelry saw a 17 percent year-on-year gain in percent year-on-year gain in demand, another 299 tons from demand, another 299 tons from 2009 statistics. Much of this 2009 statistics. Much of this demand was in overseas markets, demand was in overseas markets, and as noted jewelry demand in the and as noted jewelry demand in the US continued to decline, although US continued to decline, although at a slower pace. at a slower pace.

There are essentially three demand flow There are essentially three demand flow avenues for gold and other precious avenues for gold and other precious metals. Do you know what they are? Let’s metals. Do you know what they are? Let’s me tell you, they are me tell you, they are investment, industrial investment, industrial applicationsapplications, and , and jewelryjewelry. Unlike other . Unlike other commodities such as commodities such as crude oilcrude oil or wheat, or wheat, metals are not destroyed in certain metals are not destroyed in certain avenues of consumption. avenues of consumption.

Gold jewelry can linger on for ages, Gold jewelry can linger on for ages, and the fact that this sector and the fact that this sector accounts for more than 50 percent accounts for more than 50 percent of gold demand is significant. Some of gold demand is significant. Some analysts often refer to that in fact analysts often refer to that in fact when discussing the potential for a when discussing the potential for a weaker side of gold. weaker side of gold.

We all know that there is always an We all know that there is always an above-ground supply to tap into. above-ground supply to tap into. And for some, this is indicative of a And for some, this is indicative of a cyclical, price-driven component to cyclical, price-driven component to the gold market that could bring the gold market that could bring selling pressure when the prices selling pressure when the prices get high enough.get high enough.

There is a high number of jewelry There is a high number of jewelry buyers who count on their buyers who count on their purchases as a hybrid of purchases as a hybrid of investment and decoration. This investment and decoration. This can be noted with the increase of can be noted with the increase of 22 karat gold purchases over 14 22 karat gold purchases over 14 karat in some areas.karat in some areas.

So, when So, when gold pricesgold prices get higher, people get higher, people sell their gold. And then the prices go sell their gold. And then the prices go down, right? You know, it’s likely more down, right? You know, it’s likely more complicated than that. We can think of complicated than that. We can think of some kinds of Gold.some kinds of Gold.

Some gold is not really recoverable. Some gold is not really recoverable. Think of it in these terms – There is Think of it in these terms – There is evidence to suggest that a lot of gold evidence to suggest that a lot of gold is contained in the world’s oceans, is contained in the world’s oceans, swept there from alluvial deposits, swept there from alluvial deposits, but it is totally cost prohibitive to but it is totally cost prohibitive to imagine recovering this gold. imagine recovering this gold.

While the other is applied to other metals While the other is applied to other metals in electronic devices might be just as in electronic devices might be just as trivial to attempt to recover. There are trivial to attempt to recover. There are also forms of gold in places where it also forms of gold in places where it would be unseemly to try to recoup them, would be unseemly to try to recoup them, namely, burial sites.namely, burial sites.

Of the gold that can be recovered, one Of the gold that can be recovered, one would have to assess the probability that would have to assess the probability that the root causes of higher gold prices are the root causes of higher gold prices are not going to act as an inhibitor to gold not going to act as an inhibitor to gold sales. Make it simply, if gold prices are sales. Make it simply, if gold prices are moving higher because of fears of inflation moving higher because of fears of inflation and/or geopolitical issues, than there is a and/or geopolitical issues, than there is a probability that the same concerns might probability that the same concerns might induce the majority of holders to retain induce the majority of holders to retain their gold, or even add more.their gold, or even add more.

The same fundamentals applying to investment The same fundamentals applying to investment demand can be used for private demand as demand can be used for private demand as well. It’s important to note that the WGC well. It’s important to note that the WGC report highlights action of this type when they report highlights action of this type when they note that “recycling activity in India and the note that “recycling activity in India and the Middle East region - The largest traditional Middle East region - The largest traditional contributors to this element of supply - was contributors to this element of supply - was below what could have been reasonably below what could have been reasonably expected in the high price environment.”expected in the high price environment.”

Another angle is the fact that current Another angle is the fact that current demand trends (as explored in the demand trends (as explored in the WGC report) suggested that even WGC report) suggested that even though there are some profit-takers, though there are some profit-takers, there might be an equal or greater there might be an equal or greater number of new investors or new number of new investors or new purchases.purchases.

This was marked by some central banks This was marked by some central banks turning to net buyer status during 2010. turning to net buyer status during 2010. Under such conditions it is likely that Under such conditions it is likely that selling pressure can be absorbed by an selling pressure can be absorbed by an increased demand from another sector.increased demand from another sector.

By By The Bullion ReportThe Bullion Report