fgmr.com / By James Turk / November 19, 2012
An article in The Wall Street Journal a few days ago caught my attention. It reported: “Gold prices dropped on signs that demand for the precious metal is sagging.
Global gold demand fell 11% during the third quarter compared with a year ago.”
While gold did in fact drop $16 the day before, I found this news curious because from memory I thought the gold price had increased over the 12-month period mentioned in the article. I therefore went to check the numbers, and indeed, gold was $1620.40 on September 30, 2011 compared to $1771.10 twelve months later on September 30, 2012, a 9.3% rise in price. So how was it possible that a drop in demand resulted in a rise in price?
We all know the basic supply/demand alternatives from Economics 101. Prices rise either from an increase in demand or a fall in supply. Yet the gold supply did not fall because more gold is being produced every day and added to the aboveground gold stock, which I recently calculated for a study published by the GoldMoney Foundation. So the demand for gold perforce must have risen over this period in order for its price to have also risen.