of a family’s long-term wealth accumulation.

In recent years, demand for physical gold has been strong. Chinese and Indian private sector buyers have to date respectively accumulated an estimated 17,000 tonnes (based on deliveries from Shanghai Gold Exchange vaults) and about 24,000 tonnes (according to WGC Director Somasundaram PR quoted in India’s Financial Express last May).

It is generally thought that higher prices for gold will deter future demand from these sources, with the vast bulk of it being categorised as simply jewellery. But this is a western view based on a belief in objective values for government currencies and subjective prices for gold. It ignores the fact that for Asians, it is gold that has the objective value. In Asia gold jewellery is acquired as a store of value to avoid the depreciation of government currency, hoarded as a central component

of a family’s long-term wealth accumulation.

Therefore, there is no certainty higher prices will compromise Asian demand. Indeed, demand has not been undermined in India with the price rising from R300 to the ounce to over R100,000 today since the London gold pool failed, and that’s despite all the government disincentives and even bans from buying gold.

Additionally, since 2008 central banks have accumulated over 4,400 tonnes to increase their official reserves to 34,500 tonnes. The central banks most active in the gold market are Asian, and increasingly the East and Central Europeans.

There are two threads to this development. First there is a geopolitical element, with Russia replacing reserve dollars for gold, and China having deliberately moved to control global physical delivery markets. And second, there is evidence of concern amongst the Europeans that the dollar’s role as the reserve currency is either being compromised or no longer fit for a changed world. Furthermore, the rising power of Asia’s two hegemons continues to drive over two-thirds of the world’s population away from the dollar towards gold.