The Biggest Driver of Gold Prices Is…

The two biggest drivers of gold demand are jewelry and investment. The straw that stirs the drink for gold prices is investment demand.

Over the last five-years, gold investment demand has been down an average of 34.1 tons per year, as shown below in the World Gold Council’s Gold Demand Trends.

But in the first quarter of this year, compared to the first quarter of last year, investment demand was up by 617.6 tons—an increase of 122%.

Investment demand consists of two pieces: Total bar and coin, and ETFs and similar products. Total bar and coin demand growth was flat in the last year-over-year comparison. But ETFs and similar products skyrocketed from 25.6 tons last year to 363.7 tons this year. Meanwhile total gold supply was up about 5%, which is in line with its five year average growth rate.

Therefore, I have two takeaways for you.

First, I don’t believe the average investor has caught the gold bug yet. The money moving around in the ETFs is with a group (hint: begins with hedge), I believe, that can’t afford to sit around and wait out big time volatility. So don’t expect them to hang in if there are any signs of trouble in gold prices. Volatility may be the name of the game.

Second, if the average guy on the street starts talking about gold, it’s too late, you’ve missed the boat. As of now I don’t hear a peep. But remember, following the yellow brick road is never an easy endeavor.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.

E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.