Gold driven by Asian demand, not Wall Street, Agnico Eagle says

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Thursday, September 26, 2013

Gold prices will be dictated by continued demand from Asia and not by US newsflow, according to the CEO of Toronto-based Agnico Eagle Mines, (NYSE, TSX: AEM) Sean Boyd.

"Gold prices are going to be fine," Boyd said in an interview with Kitco. "The North American centric view is that it's all about Wall Street, it's all about Bernanke, it's all about quantitative easing and once QE is over, the gold story is over."

However, it is really Asian demand that is supporting gold, according to the executive. "The story is the physical flow of gold is moving. We really don't feel that the Indian market is at risk of seeing a sharp decline in demand, or the Chinese market is going to see a sharp decline in demand," Boyd said.

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Gold prices have fallen steeply this year, hitting a low of US$1,192/oz on the London Bullion Market on June 28, before recovering to an average of US$1,284/oz in July and US$1,347/oz in August. Gold closed Thursday at US$1,333/oz, up from the previous day's US$1,322/oz.

Boyd believes there is "measured growth" in the industry which is seeing constrained supply, continued central bank buying and strong Asian demand which will "likely continue to be strong with some volatility."

"Why would Deutsche Bank be building the largest vaulting facility in Singapore - 200t - this tells you that something profound is happening, regardless of the paper market," Boyd said.

In Latin America, Agnico Eagle has the Pinos Altos gold-silver mine in Mexico and the La India gold project in Mexico's Sonora state which began commissioning this month and is expected to contribute 40,000oz gold next year and 80,000oz-90,000oz in 2015.

GOLD DEMAND TRENDS

Net global gold demand in the second quarter totaled US$39bn, a 23% fall year-on-year, according to the World Gold Council (WGC). Physical demand for gold in Q2 was 856t, down 12% on a year ago.

However, the principal driver of the decline was outflows from ETFs.

Jewelry demand was up 37% in the second quarter to 576t (US$26.2bn) from 421t in the same quarter last year, and reaching its highest level since 3Q08, according to the WGC.

Bar and coin investment grew by 78% globally to a quarterly record of 508t (US$23.1bn).

More significantly, in China, demand for gold bars and coins jumped 157% compared with the same quarter last year, while in India it rose 116% to a record 122t.

Jewelry demand in China was 153t, up 54% on the same quarter last year, while Indian jewelry demand rose by 51%. The WGC also reported significant increases in demand for gold jewelry in the Middle East (33%) and Turkey (38%).