Gold Essay

1011 WordsMay 7, 20135 Pages
1. In the decade up to 2010, the market segment that constituted the highest demand for gold was the jewelry consumption segment. It made up for 50.1% of the total gold demand in 2010, dwarfing the other two main segments in the process, with the industrial and production use segment making up 10.2% and the investment segment making up 32.4%. The trend of the demand, however, has been shifting towards the investment segment from the jewelry consumption segment over the last few years of the decade, with demand from the industrial and production segment staying at a near constant. While jewelry consumption’s 50.1% of total demand in 2010 may seem impressive, keep in mind that it made up for 80.7% in just 2001. The strong demand for gold from the jewelry consumption segment can be largely attributed to the rise of developing nations such as China and India over this time period. Not only do their improved economies afford people with more disposable income to spend on luxury items such as gold, many Asian countries, India in particular, are also more culturally inclined to purchase gold over other precious metals when compared to western countries. Such claim is further evidenced by statistics, as shown in Exhibit 7 from the Harvard case study document. India made up for 31.5% of the total worldwide demand for gold in 2010, by itself. And in the same year, East Asia as a region constituted 56.7% of the total gold demand around the globe. The shifting of demand towards the investment segment in the last few years of the decade can be attributed to the global financial crisis that peaked around 2007-2008. The worldwide financial meltdown led to many quantitative easing programs enacted around the globe by institutions such as the US Federal Reserve, the Japanese Central Bank, and the European Central Bank. The purchase of “mortgage backed securities and

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