Price Dip Encourages Asian Demand for Gold

May 21, 2012 - by buygold.co.uk · Filed Under Gold News Leave a Comment

Gold prices appear to be losing momentum right now with a 7% drop being recorded from the beginning of the month. In fact, the $1550 barrier was breached this week by the falling prices for the first time since 2011 December. Back then, the low point had been reached at $1581. Analysts believe that the precious metal may go down to this level in the coming days.

Asian Demand Picking Up

Even at the beginning of this month, analysts were surprised to note that the demand from the Indian subcontinent remained quite sluggish. Normally, reasonable demand can be seen from here at this time of the year. However, the scene has changed now with demand from Asian markets picking up. The dip in prices is believed to be the primary reason for this renewed demand.

It has always been the trend for Asian markets to show increased demand when prices of gold fall while American markets react in the exact opposite manner. Demand from the U.S. is usually subdued when gold prices decline and re-emerge when an upward movement is beginning to become evident. In Singapore, demand is slightly ahead of supply as of now while in India, Thailand and Indonesia too interest is beginning to return to this precious metal.

Gold Demand in European Markets

In the European markets, there is no discernible increase in the demand for gold or other commodities. In fact, commodity prices have largely remained at status quo here. This situation is not likely to change any time soon unless a dramatic decision is arrived upon by Greece which is very much in the spotlight now. There is a very real fear about the Euro breakup and investors are waiting and watching to see if Greece will really exit the Euro.

If this does happen, many other Eurozone countries will start considering the same move too. The fate of the Euro cannot be predicted with any accuracy right now. But one thing is clear, if Greece moves out of Euro the currency will be badly shaken. This situation will encourage these markets to follow the lead of Asian nations to buy gold.

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