Gold rush over?

Gold is viewed as a safe haven. Thus, it is interesting to see how gold behave in the past few quarters, when market fell off the cliff.

In the chart below, I plotted the worldwide identifiable gold demand from Q108 till Q209 in USD. They are jewelry, industrial & dental, and identifiable investment. In addition, I plotted gold price over the same period.

First we look at jewelry (yes, it is the gold chains, rings, etc, that ladies like). It maybe a surprise to many, but jewelry is actually the largest demand for gold. We see that jewelry demand peaked at Q308 and fell in Q408 and Q109. Since gold is a safe haven, I would thought that it should be in greater demand in Q408 and Q109 when market uncertainty was at its highest point. Apparently this is not the case.

However, if we look at identifiable investment, it shows a pick up over Q408 to Q109. Comparing this observation with that from jewelry, I would think that source of demand probably play a part. Comparing to the general retail jewelry buyers, gold investors are probably more sophiscated, more concern of uncertainty, and have more resources to satisfy its own demand.

Finally, we see that industrial and dental demand basically follows the trend of economy pretty well, bottom at Q408 and Q109 period.

In a bigger picture, we can see that the total gold demand starts to fall in Q209 to pre-crisis level in Q208. Is this an indication that market has shrugged off concerns over uncertainty? Maybe. But one thing strange is that the price did not correlate well with demand.

Is the gold rush over by now and market stability returns? Will the trillions dollar rescue packages lead to hyper inflation? It is difficult to draw conclusion now, but gold trend is certainly telling a lot of stories.