It's been a good few days for investors holding on to gold, and we've been getting lots of questions as to why gold prices are up this week.
Gold futures had their biggest one-day gain of the year Thursday, up nearly $40 an ounce, and ended the week up 4.2% at $1,453.60.
At one point this week, gold had retraced half the loss it incurred during its April nosedive. In a two-day period, the yellow metal fell $225 an ounce, hitting a two-year low on April 15.
It is natural for any financial asset to enjoy some sort of a rebound after such a steep plunge. But there are some sound fundamental reasons as to why gold is up.
Here are four.
Why Gold Prices Are Up Reason #1: Asia's Gold Rush
As discussed in previous articles at Money Morning, one of the biggest reasons for the bounce in gold prices was the unexpectedly strong demand for physical gold around the world.
Long-term investors, particularly in Asia, considered the drop in gold prices a gift from the short sellers on Wall Street.
Sales at Australia's Perth Mint doubled after the two-day gold price tumble. The China Gold Association reported retail gold purchases tripled across China in that time frame. Japanese consumers were net buyers of gold for the first time in eight years.
The buying led to huge premiums to the quoted London gold price across Asia's physical gold markets – pushing premiums to 15-month highs.
In addition, gold shipments to India – traditionally the world's biggest buyer of gold – were at record levels. Shipments this past week to India doubled from the prior week.
Why Gold Prices Are Up Reason #2: Buying Frenzy for U.S. Gold Coins
Physical demand was readily apparent here in the United States as well.
The U.S. Mint reported that sales of gold coins were at the highest level since December 2009. As of April 24, the Mint had sold 196,500 ounces of gold coins – the best level since 231,500 ounces of gold coins were sold in December 2009. Sales in March were a mere 62,000 ounces.
Remarkably, the U.S. Mint ran out of its smallest gold coin, weighing one-tenth of an ounce, and forced to suspend sales.