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Investors return to gold "in a major way": LBMA Chairman
Kyoto, Japan (Platts)--29Sep2008
The Chairman of the London Bullion Market Association, Jeremy Charles,
said that due to chaotic market conditions over the past two weeks, investors
are returning to gold, "in a major way."
The chairman, who is also Global Head of Metals at HSBC, was addressing
delegates in Kyoto, Japan, at the LBMA/London Platinum and Palladium Market
Precious Metals Conference 2008. The markets have been rocked in recent months
by the ongoing global credit fiasco which has seen big name banks collapse and
unite in a bid to stem the bloodletting born from dire money management in the
USA.
Charles noted that, "with confidence in the dollar and other investment
classes decidedly shaky," investors are piling back in to the yellow metal.
Gold hit a high of $1,030.70/oz March 17, coinciding with the collapse of
securities firm, and household name in the US, Bear Stearns. Since then gold
has been on a roller coaster journey largely spurred by investor in and out
flows and the US dollar. Generally, and historically, the yellow metal is seen
as a safe haven in times of political and financial instability or
uncertainty.
SELLOFF PROMPTS RENEWED PHYSICAL DEMAND
The recent sell off in gold, which the metal has now significantly
bounced back from, was orchestrated by renewed investor sentiment in the green
back. "This sell off, which was primarily due to the improved outlook for the
dollar, coupled with lower oil and commodity prices, created an enormous pick
up in physical demand from across the globe," said Charles.
He added, "This demand was in fact so great that the global refining and
manufacturing industry simply could not produce gold bars in sufficient
quantity to satisfy this pent up demand." The demand put upward pressure on
the price of gold as consumers stockpiled the precious metal. Traditionally
physical buyers tend to sit on the sidelines at times of increased price
volatility. After the sell off, which saw gold fall to the mid $700s, physical
purchases managed to lend support and give the metal a base around $800/oz. In
recent weeks fresh money, and some major short-covering, has seen the metal
break the $900/oz barrier, yet not manage to hold that level. Pundits are
mixed on where the market will go next, one analyst told Platts: "It's just
too hard to call."
HIGHLY UNUSUAL MOVES NOT ONLY STIMULUS FOR GOLD
"These highly unusual moves do of course reflect the current woes in the
global financial markets, but it is my opinion that even when this crisis
draws to an end, gold will be looked on in a very different light going
forward," said Charles. He added: "Those who have traditionally shied away
from gold as part of an investment portfolio can no longer afford to ignore
this unique asset."
The LBMA chairman also predicted that as less money is pumped in to
investment in the production side of gold, and Central Banks ease sales of the
yellow metal, coupled with increasing investor interest, "despite many
comments to the contrary, higher gold prices are likely to be the norm."
--Ben Kilbey, [email protected]
