Experts predict a bright future to the gold market which has only gained strength due to the global financial and economic crisis in no small measure aided by investors’ unprecedented appetite for the yellow metal.
Recently, gold set a new price record - at the London Metal Exchange (LME) the troy ounce has risen in price to $1093.1. In the opinion of participants to the tenth conference held on November 2-3 in Edinburgh by the London Bullion Market, after the bankruptcy of Lehman Brothers a little more than one year ago investors literally made a rush at gold.
Last month, the yellow metal price reached $1070.80 per ounce breaking the previous historical record of $1032.70 fixed in the spring of 2008. From that time on gold prices never fell below $1000 and from the beginning of this year they have increased by 20%.
Mark Linam, heading the third-largest gold mining company of the world, said that the "barbarous relic," as he called gold, has a very reliable future in spite of the fact that it is difficult to predict in the short-term.
According to experts, among favourable factors playing the game of gold is its production decrease registered at the start of the current decade and caused by lower output at old gold mines as well as the small number of new gold mines and higher operating costs.
Mehdi Barkhordar, CEO of PAMP, a Swiss company which happens to be one of the largest manufacturers of gold coins and ingots, believes on his part that demand for gold started to grow owing to the global crisis which has induced "a fundamental shift in the dynamics of the gold market.”
Gold suddenly became a safe haven asset for European and American investors who have once again discovered its advantages because, unlike other financial investments such as securities and bonds, gold is not tied to an issuing party capable to go bankrupt.
In the opinion of Aram Shismanian heading the World Gold Council, the global crisis has "transformed the yellow metal making it not intended for experts only."
If during the last year the price for gold was determined by demand from jewelry manufacturers, henceforth it is small investors who promote its value, as well as gold ETFs representing more practical financial products in comparison with gold coins and ingots.
Shismanian remarks, that gold enjoys an ever increasing demand from institutional investors, in particular from the American pension funds which are anxious about ways to diversify and protect their capitals.
Finally, if since 1999 national central banks sold out thousands of tons of gold now the tendency has changed just vice versa, and in the coming years credit establishments should become permanent gold buyers, the World Gold Council’s CEO believes.
At the world level, gold makes only a 2-percent share in the total amount of gold and foreign exchange reserves. National banks of the emerging countries have little amounts of gold in their holdings and, in the opinion of David McWilliams, an Irish economist, such countries as China will decrease their USD reserves in favour of secure assets one of which is gold.
Alex Shishlo, Editor of the Rough&Polished European Bureau in Brussels
