The CEO of Degussa Golchandel, the largest precious metals bullion dealer in Europe, explained why he disagrees with the mainstream market sentiment concerning the price of gold. Rather than dropping to $1,000 an ounce, Wolfgang Wrzesniok-Rossbach expects a $1,500 price point in the near future. He has three core reasons for this analysis: speculative investors have largely stopped selling paper gold, physical demand for both jewelry and bullion is rising, and mine production and supply is not increasing.

He also explained why Degussa has just opened its first Asian retail bullion store in Singapore, which is the latest evidence of the trend of physical gold moving from West to East:

when a market has a certain size we are perfectly fine with it, and Singapore has that size with 5.5 million people, 50 million tourists a year. [It has] a very stable environment, actually, politically as well as economically… Plus, there’s a lot of support from the government to create a vibrant gold market in Singapore…”

Highlights from the interview:

“I think if you look at the development in the last couple of years, we have seen a lot of selling, especially in ETFs – paper-traded gold. That is mostly through now. There is some selling, but not to the extent that we have seen. That’s the first reason. Demand is rising both for jewelry and for retail investment. Lastly, mine production is not really rising on the supply side – not rising that fast anymore. And the scrap supply is down. If you take everything into account, there’s no reason we should go [down] to $1,000. In my point of view, $1,500 is more in the cards…

“Yes, [chances are that gold might drop after a Fed rate hike], but the question really is to what extent and when actually will the rate hike come? It might come, but at the same time we might end up globally – even in Europe – for many, many years to come in a Japanese like situation here with very, very low interest rate environment. So a 25 basis point [rate hike] here and there wouldn’t make a difference…

“Our clients disagree [that gold is no longer a safe haven]. They show every day, coming into our stores throughout Europe and now also in Asia. We see very strong buying of investment gold – bars, coins. This is clearly safe-haven buying. People are not panicking. That was the case in 2008, but it’s more like a quiet accumulation of some gold stock these days…

“We are a retailer. To us, when a market has a certain size we are perfectly fine with it, and Singapore has that size with 5.5 million people, 50 million tourists a year. [It has] a very stable environment, actually, politically as well as economically… Plus, there’s a lot of support from the government to create a vibrant gold market in Singapore…”