Today the gold price continued its recent run-up, breaking through the psychologically important $1,400 level.
Following a 1.8% surge on Friday, gold prices hit $1,407 in trading in Asia early this morning (Monday) and ended the day up 0.66% at $1,405 an ounce.
That means gold has soared more than $200, or 16.7%, since sinking to $1,200 in late June.
Analysts pinned the latest increase in the gold price to weak U.S. economic data and tensions in the Middle East.
"When you look at gold, it only has to travel back through $1,416 to re-enter the bull market. So we're pretty close to that and it [the gains] has been the result of physical demand, geopolitical issues and also in the U.S., and what's happening with tapering," Jonathan Barratt, founder of the commodities newsletter Barratt Bulletin, told CNBC Asia's "Squawk Box."
Gold, though, is still caught in a tug-of-war between Western paper gold investors who continue selling gold ETFs because of fears of Fed "tapering" and buyers of physical gold in Asia who are purchasing the precious metal on any major drop in the gold price.
Evidence of the surge in physical demand for gold, primarily from Asia, was easy to spot from some of the gold news headlines last week:
- Gold borrowing remained near a four-and-a-half year high; U.S. futures moved into backwardation
- The World Gold Council forecast demand for the metal is on pace for 4,000 tons this year
- Global demand for gold jewelry hit the highest level since 2007
But the biggest story of last week was the huge amount of gold leaving London vaults for Switzerland.
Biggest Gold Price News of the Week
So far in 2013, UK gold exports soared tenfold as gold bullion moved from London vaults to the pockets of Asian buyers.
London's gold exports soared from a mere 83 metric tons in the first half of 2012 to a staggering 798 metric tons in the first half of this year.
And no, it's not rich people moving their gold around.
Switzerland happens to be the center of the gold-refining industry. Swiss refiners melt down big 400-ounce bars and reprocess them into smaller products that cater to Asian buyers.
The supply tightness is also showing up in the paper gold market.
The cost of borrowing gold among bullion dealers still hovers near a four-and-a-half year high. The one-month gold forward offer rate has been negative since July 8. This pushed the one-month gold lease rate to 0.3067%, the highest level since December 2008. The recent rate is 0.2929%, according to Bloomberg.
In addition, U.S. gold futures on the Comex moved into backwardation this month. This means traders are willing to pay more for near-term gold contracts than longer-dated futures contracts. Gold stockpiles held by the Comex fell to the lowest level in more than seven years on July 22.
Gold News from the WGC
More positive gold news came from the World Gold Council (WGC) last week in its Gold Demand Trends report.
First of all, the WGC said that demand for 2013 is on pace to hit 4,000 metric tons.
It said that demand for gold bars and coins hit an all-time quarterly record in the second quarter at 507 metric tons.
The WGC added that gold uptake for gold jewelry rose 37% from the same period in 2012 to 575 metric tons. The Council said jewelry demand in the quarter was the second-highest level since 2007.
Not surprisingly, the growth in gold jewelry demand in the second quarter was led by China and India. The WGC's report stated that Chinese demand for jewelry rose 54%, whereas India's demand rose 51% - despite government restrictions. The two countries alone account for more than half of global demand for gold jewelry.
And China and India are not the only Asian nations gobbling up gold. Indonesia, with the third-largest population in the region, also joined in the buying binge.
Demand for gold jewelry in Indonesia is expected to surge to a four-year high this year. Consumption of gold jewelry will hit 40 metric tons this year, up 30% from 2012. That's the most since Indonesia bought 41 tons in 2009, according to WGC data.
Overall Indonesian consumption, including investment demand, jumped to 33.4 metric tons in the first half of 2013, the WGC said.
Gold Still Shines Outside North America
There is one key takeaway for investors from the WGC data.
Most financial media outlets emphasize that sales from gold-backed ETFs totaled 402 metric tons in the second quarter of 2013.
But looking closer at the WGC numbers, 502 metric tons of gold bars and coins were purchased globally in the second quarter of 2013.
That's one reason we remain bullish on the metal...
But one of the biggest reasons we still think the price of gold has a lot more upside is a startling chart that we recently discovered. The story this gold chart tells is one that every gold investor needs to see.
UK Gold Exports Surge Tenfold This Year
Gold Borrowing Costs Remain Near 4 1/2-Year High on Tight Supply
Gold on Track for 4000 Ton Market by Year-End - WGC
Gold's Rout Spurs Surge in Indonesian Demand
World Gold Council:
Consumer Demand for Gold Up 53 Percent in Q2 Led by Strong Growth in China and India
Gold within Striking Distance of Bull Territory