Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold finished flat today as rising physical demand in India was offset by bad fiscal news in Greece. India has historically been the largest gold consumer in the world, although China may have surpassed it this year. With its wedding season in full swing and the festival of Diwali about to begin, Indian gold demand picked up strongly today after several months of weakness, helping to buoy the global gold price. But reports that eurozone finance ministers, meeting tonight in Brussels, may delay the $40 billion of aid needed by Greece to remain solvent helped to fan new fears about the region's debt crisis and smother commodity demand for precious metals. The dollar finished slightly lower and U.S. equities slightly higher. Silver fell by 0.2% and palladium fell 0.5% while platinum gained by 0.5%.

At the Comex close: December gold stayed at $1,730.90; December silver fell 8 cents to 0.2%; January platinum gained $7.10 to $1,566.50; and December palladium dropped $3 to $608.05 an ounce.

China's central bank is projected to increase its gold holdings substantially in coming years, according to the London Bullion Market Association. While it doesn�t disclose its holdings, China has around 2% of its currency reserves in gold, according to recent estimates, compared to 70% to 75% for the U.S., France, and Germany. Emerging markets have been aggressively increasing their gold holdings for the past few years in order to diversify away from currency-risk brought on by global monetary easing. This trend is expected to continue and even accelerate, according to the World Gold Council. With the world's largest currency reserves, estimated at around $3.3 trillion, China has the capacity to drive the gold market in a big way if it decides to match the holdings of major developed economies.

Demand from individual Chinese investors is also expected to rise dramatically in coming years. Last month, the Chinese government stated its intention to double the per capita income of urban and rural residents by 2020. A sizeable portion of this new wealth is expected to enter the gold market, the Financial Times reports, because of "the growth of trade on the Shanghai Gold Exchange, the relaxation of gold ownership rules, and the spread of gold-related investment products to the tens of thousands of bank branches across China." In addition, a gold-bullion ETF is expected to launch in China. This explosion of individual wealth and gold investment in the world's most populous nation could be very bullish for the global gold price for a long time to come.