An annual global production of about 2,000 tonnes of gold translates into USD 100 Billion, most of that is forecast to be transacted as physical deliveries through the Shanghai Gold Exchange, now the undisputed exchange for physical gold. This is an astonishing development in less than a year and it will surely bode well for gold miners once it becomes apparent that the invention and trading of paper backed ETFs and other futures instruments are for mere speculators that do not finally take physical deliveries of gold.
The COMEX Futures Exchange for the first half of 2013 only resulted in 167 tonnes of physical deliveries versus Shanghai Gold Exchange’s 1,098 tonnes. Although the paper volume on the COMEX dwarfs that of the Shanghai Gold Exchange, the level of physical deliveries is only 15% of that seen in Shanghai. So what ultimately determines the price of gold. We say that it would be the physical demand and the price set by Shanghai Gold Exchange. As China takes more gold, we expect prices to improve.
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