In a interview with Kitco News, precious metals analyst Matthew Turner of Macquarie Commodity Research says he believes that gold prices will settle down eventually, then rise. In his view, gold is undergoing a fundamental change away from being dependent on retail investor demand, and towards a foundation of jewelry demand.
Turner said that jewelry is emerging as the major factor in physical gold demand, which he sees as growing. Gold lease rates have jumped in the last month, and Comex gold inventories have shrunk. Gold futures are nearing backwardation. All these point to an increase in the desire for physical gold, according to Turner.
He says that jewelry demand is 40% below the level of the early 2000s, and he expects that it will eventually catch back up. He does admit however, to being surprised at the demand for gold coins and small bars, but doesn't think it will last.
Turner expects central bank buying to continue at present rates, also lending some support to gold prices.
(full story at Kitco News)