Should you really buy that gold jewelry, or should you consider purchasing gold bullion?
A transformation has been occurring in the gold arena over the past few years and it looks to continue as the recession continues to loom and spread around the financial world like a fast moving virus.
Jewelry has always been the traditional outlet for gold sales for many years, but now this is being overtaken by, what one analyst termed, "a veracious demand for gold bullion by traditional investors."
Demand usually leads the price so this might partially explain why the price of gold has increased recently.
The heavy buying trend has resulted in the sale of gold bullion overtaking the gold jewelry market for the first time in 30 years. GFMS, the consultancy firm that compiles benchmark supply-and-demand data on the precious metal, recently stated "gold investment demand doubled to 1,820 tonnes, while jewelry purchases fell by 23% to 1,687 tonnes, a 21-year low." GFMS also indicated that gold jewelry demand has fallen by a third from a peak of 3,294 tonnes.
The other major change in the gold market has been an increasing trend of central banks to now buy gold bullion. For 20 years, banks were the sellers of gold. But that trend has now reversed as banks in Europe slow down their gold sales and banks in China, India and Russia and the south Americas increase their gold buying significantly.
A Barclays Capital precious-metals analyst in London strongly believes for the first time in over 15 years, central banks will now be the major net buyers of bullion this year.
India's recent purchase of 200 tonnes of IMF gold, Beijing's announcement it had effectively doubled its gold reserves and was now the fifth largest holder of gold all seem to indicate a serious preference for gold over currency.
This strong trend towards gold was recently highlighted by the Swiss bank, UBS, which found that almost a quarter of central banks believed gold would become the most important reserve asset in the next 25 years.
When it comes to the crunch, it seems the big boys in banking know what is the safest way to hold their assets.
Remember - “take care of your money and your money will take care of you.”
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