Nadler believes that Greece or Portugal might be forced to sell some of its gold reserves, despite the fact the countries didn't do so last year when the debt crisis first exploded. "They might have to," says Nadler, " at least a portion might be pledged or perhaps mobilized in other ways because at the end of the day this is the reason why you keep gold in the basement."
Longer term, it's demand from China that could make or break gold prices.
According to the World Gold Council, Chinese gold demand could double under ten years. China consumed 233.8 tons of gold bars, coins and jewelry in the first quarter but worries had been cropping up that growth could slow. Goldman Sachs predicted that growth would moderate in China in 2011 to 9.4% and in 2012 to 9.2% due to aggressive interest rate hikes needed to fight inflation. Goldman wrote that April's weak manufacturing data was a demand issue as people and corporations spent less as it is more expensive to borrow now in China and as banks have to keep more money locked up.
Extra income in China is one of the reasons why gold demand is so strong. If that slows and rates keep rising, so will the ability and desire to buy gold.Oliver Pursche, co-portfolio manager of the GMG Defensive Beta Fund, says this is just a "bump in the road ... you can slow down the growth a little bit and you can play with the inflation numbers but ultimately speaking the modernization is going to drive demand and the supply demand shift isn't going to change"
Initial estimates are that Chinese gold imports could pop more than 400 tons in 2011, according to GFMS, a precious metals consultancy, and that's not counting all the gold produced in the country. China is currently the largest producer of gold in the world. According to Reuters, China National Gold, the largest state owned gold producer, said that gold demand would jump 22% in the next three years and would keep outpacing internal production. Gold mining stocks were rallying. Barrick Gold (ABX) was up 0.95% at $47.62 while Newmont Mining (NEM) was adding 1% to $56.41. Other gold stocks, Goldcorp (GG) and AngloGold Ashanti (AU) were trading at $50.18 and $45.22, respectively.
|More on Gold Gold Price News|
|How to Invest in Gold|
>To contact the writer of this article, click here: Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV