Gold coin and bar demand has surged according to the annual Thomson Reuters GFMS Gold Survey.

January 23, 2012 – Gold coin and bar demand has surged according to the annual Thomson Reuters GFMS Gold Survey. As fear-based buying consumes the markets after the European credit downgrades and fears of debt defaults, the actual performance of gold as an investment should be remembered calmly and logically. Gold shines as the best performing asset of last year, posting an 11 percent gain despite a 20 percent correction in the month of December.

Now, gold has consolidated the gains it made after breaching the 200 day moving average, which effectively ended the correction. The news out of Europe is bringing the price higher for the time being as investors seek to hedge any exposure to European risk with the buying of safe haven assets.

The Thomson Reuters survey reports that global gold investment increased 20 percent last year to $80 billion. This is not surprising in a year that we saw a nominal high in the price of gold in late August and early September at $1,923 an ounce. However, in terms of quantity, the buying of physical bullion as expressed by the Thomson Reuters Survey is very impressive and reflects the full weight and power of the market.

Further, purchases of gold coins increased by 13 percent in 2011 and are projected to increase by 2.7 percent in the near term. The purchase of gold bars shows a very strong gain of 36 percent, highlight the quantity of physical bullion that was transferred last year.

In Asian markets, gold buying on the dip has resumed and increased. India and China have a long-term relationship with gold, which had cooled a little recently, but since the correction in December buying has resumed at a fast clip. Consumer demand for gold jewelry rose in India from 5 to 7 percent in 2011 and the largest retailer in the country projects growth at 10 to 15 percent this year. Indians store their wealth historically in gold and more than the West in jewelry. Such significant demand will affect the prices of gold coins in the rest of the world even more this year.

The Thomson Reuters Survey places the price of gold reaching $2,000 an ounce this year, which is conservative compared with the published projections of Goldman Sachs, Credit Suisse, and JP Morgan. Still, a projection of $2,000 an ounce is a fair projection and it demonstrates the robust power of gold to gain and advance in the market in the coming year.

Kevin Johnson

Senior Staff Writer –

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