By MoneyMorning.com.au
I was strolling through the main square of a small French town a few days ago. It was about the same size as Tamworth – around 40,000 people. It was in the middle of nowhere. And would you believe next to the boulangerie was a shop selling gold and silver – and nothing else.
No foreign exchange. No travellers cheques. Just precious metals. So naturally I popped in to see how business was doing.
The shop seller told me the same thing I’ve heard in Australia (and other parts of the world). Bullion dealers can’t keep up with demand. According to her, sellers are buying increasingly large amounts of gold – particularly on the dips. And she can hardly get her hands on any silver to sell.
Remember – this wasn’t in the big smoke of Paris. It was a fairly small town. And I think it just goes to show the growing demand for physical gold and silver is global.
It would certainly back up the Perth Mint’s recent report that demand is…
… currently running at unprecedented levels and we have been inundated by high levels of web and telephone traffic from clients all around the world. This has put tremendous pressure on our business systems and Customer Service department which have struggled to cope with the number of enquiries and orders.
And King World News reported…
…Peter August, CEO of Australian Bullion Company, Melbourne Australia, which is one of the largest and most respected bullion dealers in the country told KWN, “We have never, ever seen these levels of demand for physical gold and silver.
“One of the biggest changes we have found in recent times is that our client base has become much more savvy and they are aggressively buying on the dips….
“As an example, with the recent plunge in the price of silver, we have noticed that the demand for physical silver has exploded. Another complicating factor is the fact that there are virtually no sellers in the silver market.
“We have found the same exact buying pattern is occurring in the gold market. As the price declines, we have been experiencing an unprecedented amount of new orders for physical gold. Demand has been so extraordinary for both gold and silver, that our two main suppliers are in the process of ramping up capacity because they simply can’t handle the current levels of demand.”
But while it’s getting harder to get your hands on physical gold, there is some good news. The chart below shows the HUI gold stocks index divided by the gold price. This chart falls when gold stocks underperform and rises when gold outperforms. And it looks to me as though this chart is finding its feet at last.
Last week we saw gold stocks start to move with the gold price. And while it’s still early days, it looks as though gold stocks might start moving with the gold price.
And that could be very good news if you’re holding onto gold stocks. One of the gold producers I’ve recommended in Diggers & Drillers, for example, already has bigger profit margins than any of its peers. It’s cashed up. Has no debt. And it’s increasing production. (Click here to find out more about that one…) If it starts moving with the gold price – and the demand for physical bullion keeps pushing the gold price up – who knows how high our gold stocks could go?
Dr. Alex Cowie
Editor, Diggers & Drillers
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