The global demand for gold hit a new record value level in 2012 and central banks around the world were gobbling up the precious metal at rates not seen in nearly 50 years, according to findings released by the World Gold Council this month. The industry council said that in value terms, gold demand in 2012 was over $235 billion — an all-time high — and fourth-quarter figures of more than $66 billion marked the highest Q4 total ever.
Central bank buying, especially in the developing world, was responsible for about 12 percent of the total demand for gold in 2012, up from 10 percent the previous year. According to the council’s research, even as the price of the precious metal averaged a record $1,669 for the year, central bankers bought more than 534 metric tons — the highest level since 1964 and 17 percent more than in 2011.
The central-bank buying spree was led by monetary authorities in Russia, Brazil, Iraq, and other developing nations. Analysts said the exploding demand was part of a worldwide effort to diversify away from the troubled U.S. dollar and the severely embattled euro as the global economy continues to struggle, with more than a few experts harping on so-called “currency wars” as central bankers race to devalue their fiat currencies through inflation of the currency supply.
Chief market analyst Ric Spooner at CMC Markets told CNBC that he expected the trend to continue, pointing to a "broad tendency for the U.S. dollar to decline in value with the Federal Reserve's QE (quantitative easing) policies.” Assets like gold, he added, “are a hedge against debasement against foreign exchange reserves."
Marcus Grubb, managing director of investment research at the U.K.-based World Gold Council, noted in a statement that China and India remained the world’s gold “power houses” despite troubled domestic economic conditions. Even in the face of Indian government policies aimed at curbing demand, Grubb said, consumer sentiment toward the precious metal remained strong in India, reaffirming the important role played by gold in that nation with its “underdeveloped” financial system.
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