Bernard Hickey talks above in a Double Shot interview with NZ Mint's Head of Bullion Mike O'Kane about gold's relative weakness in recent months as stressed leveraged investors bailed out. He also looks at its prospects if the Euro zone were to collapse.
"Should the euro zone collapse we may see the gold price drop initially as everyone gets out of euros and into US dollars, but the US is still inherently unstable, so we may see the gold price surge after that," he said.
But he pointed to physical demand and supply trends supporting the gold price, including demand from central banks.
"It's going to depend on how it (the euro) collapses. If it's a controlled collapse we may not see it so great for gold, but if it's an uncontrolled collapse, we might see a run on the gold market."
Money printing by the European Central Bank may actually coincide with deflation in Europe in the short term, which would be restrain gold prices, but may be positive in the long run as inflation is generated, O'Kane said.
Investment demand for bars and coins throughout Asia remained strong, with demand in China up 24% from a year ago and up 78% in Vietnam, where real term deposit rates are negative while inflation is surging.
New supplies of gold were taking some time to come to the market, with lags of up to a decade between investment decisions and gold pours, particularly as gold becomes exponentially more expensive to extract the deeper miners get.
"They've pretty much exhausted the easy gold and are now getting to the expensive areas, much like oil," O'Kane said.
However, he doesn't think gold supply has hit peak levels yet.
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