How Long Can Gold Prices be Held Down?

By: Julian D. W. Phillips | Mon, Jan 20, 2014
Print Email

As we discussed in our last article, China has managed to acquire well over 2,000 tonnes of gold while the gold price has fallen from $1,650 to $1,180. This is a remarkable feat in itself.

So the next logical question is, "How long can they keep on doing this without the gold price rising rapidly?" The short answer: As long as demand in the traditional markets is either lower or the same as supply. This has two aspects, first the potential for rising demand and second, the potential for falling supplies.


London Physical Market

The main traditional market is London, where supposedly 90% of physical gold is traded. China buys there, 'on the dips' by importers taking bulk supplies and shipping them to Hong Kong (and Shanghai?) as stock for the distributors to the retail traded. This is replenished according to perceived future demand, hence the premiums that appear there. It's done in a way so as to not push prices higher. But they buy large volumes from other sources, direct.

Indian demand is routed through the London market totally, via the banks that supply India. European and U.S. physical demand accesses much of its gold there too. These buyers have been negative gold for over two years now, but particularly in the last year. Will that demand pick up?

For Europe and the U.S., we don't expect it to do so while the U.S. is selling gold from the gold Exchange Traded Funds, based there, to switch into equities. European investors expect the same scene as we see in the U.S. now in the next two years, but we do not see selling in Europe at anywhere near the levels seen in the U.S. in 2013.

Indian Demand to Return

As for India, the government has already informed us that they will be reducing import duties and easing import regulations on gold, and silver, "soon". Expect this to happen well before the elections in May this year. The potential demand from that source could be as high as 75 tonnes a month, or around 18 tonnes a week [up to 900 tonnes a year].

This will swamp the market, where demand and supply are around the same levels currently.

Can China Lower Demand to the London Market?

While this seems a fatuous question, it must be asked to understand China's position. Right now, China is still developing its access to gold suppliers both in the traditional markets and outside of these markets. It cannot hold back retail demand because of price and does not want to do that. It wants as much gold as it can access. It accepts the discipline of price, so, as a constant buyer, unless it forcefully regulates gold imports, it must allow access to all gold markets. This won't happen!

If the gold price soars to new record levels and above, in dollar and other currency terms, it will become a reserve asset itself and for those holding it. Access to people's gold will be easier than it will be in the West.


Supply changes will be looked at in the second part of this article

Hold your gold in such a way that governments and banks can't seize it!
Visit: And Enquire @

Subscribe to



Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.

Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Gold-Authentic Money / Julian D. W. Phillips assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit which you may incur as a result of the use and existence of the information provided within this Report.

You should be aware that the Internet is not a completely reliable transmission medium. Neither Gold-Authentic Money / Julian D.W. Phillips nor any of our associates accept any liability for any loss or damage, including without limitation loss of profit, which may arise directly or indirectly from your inability to access the website for any reason or for any delay in or failure of the transmission or the receipt of any instructions or notification sent through this website. The content of this website is the property of Gold-Authentic Money or its licensors and is protected by copyright and other intellectual property laws. You agree not to reproduce, re-transmit or distribute the contents herein.

Copyright © 2003-2016 Julian D. W. Phillips

All Images, XHTML Renderings, and Source Code Copyright ©