Gold Price Down, Physical Demand Strong — Is it Time to Buy?



Gold’s current price performance is disappointing some market participants, but compared to other investments the yellow metal continues to offer protection from turbulence.

“When I look at the numbers, I want to remind precious metals investors that gold, even though it’s not always in the green, is actually doing a lot better than some of its peers,” said Mark Yaxley, managing director at SWP.

“I think the message for investors right now is you can’t always win — ie. you can’t always make money on a trade,” he continued. “However, you can cut your losses. And I think that’s the role that gold is playing for investors who are in precious metals right now — they are reducing their losses during these very, very challenging times.”

Yaxley said the top factor pressuring gold right now is the strong US dollar. “In the second quarter, the US index was up 6.5 percent. And in the second quarter, gold was down 6.4 percent,” he said. “So you see that the correlation is really one-to-one between the two — that’s obviously putting a lot of pressure on the gold price.”

SWP is a precious metals dealer, and Yaxley said that while gold’s low price suggests demand is lagging, that’s not the case — physical metal buying is 60 percent higher than his company had expected for this time of year.

He pointed to high premiums as proof, saying that producers and suppliers want to move inventory and will only boost premiums when demand is strong.

“Premiums I always say are one thing that don’t lie,” Yaxley explained. “That’s because producers and suppliers will only charge higher premiums when there’s a lot of demand for their products — they don’t want to sit on inventory, they want to move it out the door as quickly as possible and recover their investment.”

His final advice for investors was to be patient — while it may take time, precious metals do their job in the end.

“They always come through … they always provide the security and stability that they’re designed to. And so be patient and let them do their work — I think you’ll be happy with your decision at the end of the day,” Yaxley said.

Watch the interview above for more of his thoughts on the gold market.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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