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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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What's The 3rd Largest Asian Gold Market?

Answer to the trivia question: Thailand. Where news this week suggests demand has recently taken a hit.

Local media reports that Thai gold imports dropped a remarkable 78% during the first quarter. No exact amounts were specified, but the quoted figures point to a fall on the order of several tens of tonnes of bullion.

The figures jive with recently-released data from the World Gold Council. Which show that Thailand's gold consumption slumped by over 30 tonnes in Q1. Representing a decline of 56% from the year-ago period. (Thailand's imports are often higher than its actual consumption, because some of the bullion that's brought in is then re-exported.)

That's a significant observation. Showing that gold demand during the last few months has been falling in a number of key markets globally. The recent World Gold Council study also showed India's Q1 gold demand down by 26%. While China dropped 17%.

The steep decline in the Thai market has been attributed by some analysts to political instability in the country. Which has disrupted normal trading patterns for the market.

But other observers point to the poor price performance of bullion over the last year. Surmising that Thai buyers are simply scared of taking further losses on their gold investments.

Such price-related aversion would explain some of the patterns unfolding elsewhere in the world. Like Turkey--which was the world's fourth-largest gold buyer during Q1 of last year.

That market also took a tumble during the most recent quarter. With gold demand dropping 42%, for a decline of 20 tonnes year-on-year. The World Gold Council likewise attributes this fall to "price sensitive" buyers here.

All of which suggests something interesting. Bullion may need to get more expensive before buyers in key markets like Thailand and Turkey return to the bid.

Last year, we saw bargain-basement buying from Asia. With deal seekers soaking up cheap bullion being unloaded by ETFs and other holders. The recent data suggest that phase may be over. And we need some upward momentum in bullion to coax profit-seeking buyers back into the market.

The encouraging thing is: the price is holding around $1,300 per ounce even with all of these key markets going red. It shouldn't take much to see an improvement from here.

Here's to putting in a bottom,

By Dave Forest




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