Physical Demand Drives Gold Pricing

By Robert Davis
Dec 20 2010

Wall Street analysts announced this morning that physical demand for gold has increased the pricing index of the precious metal several times over.

Gold has been on a streak for the last couple of years. It has managed to reach new heights on several occasions and has broken all the records that were set in the early days of trading.

However, gold was suffering through a lull that was leading many to believe that the good days for the precious metal were long gone. But today that started to turn around as a report on the physical demand for gold has been stirring the fire for many investors.

While gold was still rising over the past two years, the physical demand was very low, which was in response to the high prices. Manufacturers that were needing the metal were not likely to pay the high prices but they were willing to explore other options, such as low-grade gold.

But now the physical demand has jumped in a big way and this has sparked a new round of trading. Electronics and automobile manufacturers rely on gold for their creation process. Most gold is used as a conductive material and is a major component in computers, cell phones and other mobile devices.

As the physical demand increases so will the price, which is the standard for supply and demand. However, once the clearing houses manage to start selling off their stock it could bring the price down to a certain degree.