Category Investments

Golden moments

29 September 2004 Angelo Coppola

These thoughts on gold are brought to you via PSG Funds managers, from Baker Steel.

"...The US dollar gold price continues to hover around US$400/oz as it waits to find some direction. The outlook has improved with the US dollar looking ready to continue its fall as central banks and investors around the world find themselves swamped with the currency.

Recent government bond issues in the US have been poorly supported by the private sector. After the recent purchase of gold by Argentina we now find that the Europeans are likely to sell less than expected.

Maybe they now realise that swapping a hard asset with fiat money, that is being expanded at an alarming rate, is not a good idea..." David Baker, September 2004

UBS report that after the recent renewal of the European Central Bank agreement, gold sales of 500 tonnes per annum from agreement countries are fully factored into the market.

UBS now believe that the certainty of these gold sales is much less than the market is currently pricing, and that sales may be as little as 250 tonnes per annum.

This reduction would compensate for reduced producer de-hedging and the potential slowdown in physical demand - although the signalling impact of such a decision would be greater than the direct volume.

Chinese gold demand forecast to triple
Gold demand in China is expected to triple in coming years as a result of ongoing gold market deregulation in the world's most populous country, according to a World Gold Council report.

In its latest report released ahead of the London Bullion Market Association meeting in Shanghai, the council forecast a rise in demand for gold in China, from the current 200 tonnes, to an annual 600 tonnes in "the next few years".

"The Chinese people are generally becoming more affluent and gold, while it may no longer be a sole destination for investment, will certainly play its ancient Chinese role of a conspicuous display of wealth, as an adornment and as a perceived store of wealth," the report said.

As an investment, gold has been thrown open to small investors on the mainland where it is now available in pass-book accounts via commercial banks as bullion, coins and jewellery.

We continue to hold gold stock funds and bullion exchange traded funds in all our portfolios. We remain of the opinion that gold is an excellent insurance policy at present and a truly cheap asset class, says Scott Campbell, at PSG Fund Managers.

Health warning - this article should not be considered to be offering advice. Speak to a specialist.

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