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Bullionstar recently spoke with gold expert Bron Suchecki of the Australian Perth Mint. In a short ten-minute interview, they discuss the latest developments in the gold market, the role of the paper gold market and the Mindset of investors who buy gold. Below the video you can read the summary of this interview.
In recent years, we have seen a flow of gold from West to East, but this year there is a lot of demand for physical gold from the West. Gold imports in China are declining again and in India the Gold price even lower than elsewhere in the world. Meanwhile, in the West, interest in buying gold has actually increased.
Many investors now expect the gold price to rise further, but I think we will be hovering around this level for a while. We need to consistently hover around a gold price of $1,300 to $1,400 to get renewed interest in gold.
The price is currently being suppressed by investors who entered at a higher level a few years ago and who now want to get out of the market. This must first be worked out, so that a solid basis is created for a further price increase.
The market for 'paper gold' is inflated by speculators who often invest with borrowed money. Because they are in the market with a lot of borrowed money, they are waiting for a good moment to exit. These are not the players who are in gold for the long haul. Speculative money can cause the price to rise and thus increase interest in physical gold , but in the long run this is not a factor that can affect the price of gold in the long term.
The paper gold market provides more liquidity. It generates more turnover, which is actually positive, according to gold analyst Suchecki. This means that you can easily buy and sell gold. As an investor, you don't easily buy shares of a company that is hardly traded. It is precisely because of the paper gold market that you can easily sell your position in gold.
When the spot price of gold and the futures diverge too far, arbitrage brings these two prices closer together. This is a type of elastic band that can move. By looking at the difference between the current gold price and the gold futures market, you can get an indication of what is happening underneath the gold market.
By opening up the gold market and making it accessible to private individuals, more gold will end up in the hands of the Chinese people. I think in China they mainly aim to have as much gold as possible in their own country, whether it is owned by the central bank, sovereign wealth funds or private individuals does not matter much to the government . As long as there is enough gold in the country, because that provides a solid foundation.
I don't believe they Buy gold For a kind of geopolitical reset of the gold-centered money system, because governments benefit from fiat money.
So I don't see a long-term strategy towards a gold-backed currency. I think they just think it's a sensible policy to make sure that the population owns gold as a form of stable store of value.
For most investors, it is difficult to find a Mindset in which you express your ability in terms of numbers Ounces gold. Most investors will continue to look at the value of their gold, expressed in their own currency. In my experience, many investors are not fully aware of the exchange rate effect on the price of gold. Sometimes they call and say: "I see that the gold price has risen, I want to sell," while the price in Australian dollars is actually lower at that time . And then they don't look at the effect of the exchange rate.
Thus, many investors in countries outside the United States are getting a misinterpretation of what the gold price is doing. That's something that's hard to break. You should actually look at how many troy ounces of gold you own and try to expand that.
It's an educational process. Many investors come to gold for the short term, but there are also others who take a more cyclical macroeconomic view for the longer term. They often buy gold with the aim of making a profit, but gradually they delve into the subject through various blogs and websites and start to think differently about gold.
