The gold market in 2011 increased to a great extent and it will rise even more in 2012. As per the GFMS who is one of the most esteemed precious metal market analysts, the Chinese market, private and government will take up more than 22 million ounces of gold in the year 2011 which is much higher than 2010 levels. This means that the Chinese people are taking about 30-35% of the newly supplied gold off the market.
If the Chinese people buy gold directly from the gold supplying companies, then it means that fewer ounces of gold will come into view on the COMEX market. You must know that the COMEX market is heavily influenced in which only a small part of gold is needed to meet the agreement compulsions of the existing contracts. If it ends getting as much gold as it has received in the past years, then it will have to decrease selling paper contracts for gold and also close huge number of short positions. Thus, you may run into loss and, as such, get entangled into debt problems in such a situation.
It has been recently reported by a London metals trader that the Chinese government is forcefully bargaining with several gold supplying companies to buy their entire gold on long-term contracts. The Chinese people attain success in signing the contracts and as such, this may leave a huge impact on the gold trading market. However, it should not matter much as to whether or not the Chinese obtain the same number of ounces of gold from the suppliers directly or by accepting the COMEX contracts. As such, it may take little time for the common people to know about the propositions of this shift.
The world’s largest gold trading center and the impact on the London market would be much more severe. The London contracts are dealt with to result in the gold’s delivery. The gold market is presently influenced to a great extreme than the COMEX. It was estimated by the analyst Adrian Douglas at the commodity Futures Trading Commission hearings in March 2010 that the London market could cover up to 3% of the gold liabilities at the most. Jeffrey Christian – an analyst confirmed that the London exchange held only one ounce of gold for every 100 ounces of liability to gold delivery.
Thus, if the London market gets five million ounces lesser gold in 2012 than it got in 2011, then the ones who have sold contracts on the exchange may have to settle to 500 million ounces of short positions by buying metal from outside to complete the contracts or pay cash to stay in their position. Even in case of recycled gold, the annual global new supply of gold is less than 100 million ounces.
The price of gold have been banged down in the past few weeks to enable the owners of gold question themselves the strategy of owning gold. However, if the price of gold is supposedly to increase more in 2012, then it would be better to maintain your gold position in the market.