Interesting comment that the Chinese are increasingly buying physical gold and silver regardless of price.

Regards - VHF

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Gold and Silver Bar Demand To Remain Strong

Nigel Moffatt - Perth Mint

May 20, 2011

Significant physical demand for silver bars has been experienced, with the 10 ounce, 20 ounce, kilo and 100 ounce bars proving the most popular. However, this recent surge in demand has exceeded our capacity to produce them. In response, additional silver refining and barring equipment is being installed at the refinery which is intended to increase capacity to double the current level. It is expected that this new equipment will be commissioned and operating at full capacity in early July.

Gold bar demand continues at a high level, prompted by continuing concerns over the US economy and persisting sovereign debt crises in Europe. Over the past six months, China’s presence as a gold buyer has become ever more apparent, and unlike India, whose legendary demand is driven by perceptions of good value (and therefore price inelastic), China’s demand appears strong notwithstanding the current price. The refinery meets this demand by producing on average six tonnes of kilo bars per week which are readily snapped up by eager buyers.

Despite the recent downturn in prices, physical bar demand for gold and silver remains at very high levels and looks like remaining so for the foreseeable future.