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Gold Firms on Weaker Dollar and Stocksby Peter A. Grant
May 29, AM 
Gold remains generally consolidative, underpinned by a weaker dollar and a retreat in stocks today and continued evidence of strong physical interest, particularly in Asia. Weighing on the yellow metal is the dominant up-trend in equities, which has prompted significant redemptions in gold-backed ETPs, along with persistent expectations that the Fed may start tapering accommodations sooner rather than later.In making note of continued strong physical demand in Asia, Marcus Grubb of the World Gold Council said, “Even if ETF outflows continue in the U.S., it is quite likely that the gold previously held in ETFs will find a ready market among Indian, Chinese and Middle Eastern consumers who are taking a long-term view on the prospects for gold.” What Grubb is referring to is the movement of physical metal from weak hands in the West, to strong hands in the East. This is a theme we've discussed in the past; and what's most significant with regard to supply, is that once it has moved from West to East, it probably is not coming back. In a DMR from earlier in the month, I theorized that once the metal has been transferred to Asia it likely to "stay off the market for decades, perhaps generations. Asians tend to buy physical gold as a form of long-term savings. They generally don’t sell when the price goes up, nor do they sell in a panic when the price drops. If it moves at all, it is usually gifted among family members and friends." There will undoubtedly be a point where Western investors want that gold back, perhaps driven by the emergence of inflation risks, or a faltering of the stock market or some new and unforeseen black swan. At that point, investors in the West may — like Asian investors — demand the real thing, but where will the supply come from if those in the East aren't selling? Even if Western demand manifests in the form of renewed interest in paper gold, those Trusts are going to have to find the metal somewhere. And that may prove rather difficult. In a Forbes article, John Embry of Sprott Asset Management believes, “that the pricing mechanism of the gold and silver markets will swing to the physical market, which cannot be manipulated, because, basically, either you’ve got it or you haven’t.” "Either you've got it or you haven't." Truer words were never spoken. Do you got yours? NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
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