Seizing of Fannie and Freddie could prove useful for gold investment

A precious metals expert has claimed today (September 8th) that the US government's seizure of Fannie Mae and Freddie Mac will herald a new era of gold buying.

The government has taken control of the two lenders - who make up almost half of the US home loan market - after figures suggested that mortgage defaults are rising at the fastest rate for 30 years.

Now Wallace Ng, chief trader for precious metals in Asia Pacific for Fortis Bank, has explained that the implications of the move could signal a surge of gold sales as investors seek alternative assets.

He said: "The US government rescue of Fannie Mae and Freddie Mac means the financial situation is not stable yet. That's bearish for the dollar and supportive for gold.

"Another source of demand for gold comes from investors who have shorted the precious metal in previous weeks. Some of them now tried to square the positions by buying back the metal.''

Mr Ng's comments follow a recent positive assessment in terms of gold investment by major international bank Standard Chartered, which claimed that the price will reach an average of $994 for 2009, with particularly strong growth in the second half of the year.

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