Gold Holds Tight But "Upside Potential Outweighs Downside Risk" as Mining Output Falls, Asian Demand Rises
The price of Gold Investment bullion held in a tight 1% range above last night's 3-week low early in London on Thursday, recording its lowest AM Gold Fix since Oct. 24th at $714 per ounce as commodity prices and world stock markets tumbled once more.
Crude oil touched $55 per barrel – a new 20-month low – while government bonds continued their "safe haven" gains.
New data showed Germany, the world's third largest economy, sliding into recession during the third quarter. China's industrial growth slowed to a 7-year low in Oct.
"We are still bullish on gold," said Paul Walker, CEO of the widely-respected GFMS precious metals research group, to South Africa's Classic Business radio show on Wednesday.
"We think there is a lot more upside potential for gold than there is downside risk. Gold has done very well, relative to other asset classes.
"For those who are still looking for a longer term play – not a 3-month play, but say a 6- to 9-month play – it wouldn't surprise me to see a $1,000 gold in that scenario."
Japan's Nikkei stock index today matched last night's 5% loss in US equities, while European markets lost 0.3% on average.
For French, German and Italian investors looking to Buy Gold today, the price held above Wednesday's one-week low of €569 as the single currency jumped 2¢ from an early low to hit $1.2590 to the Dollar.
The Gold Price in Sterling meantime recovered £480 an ounce – almost 2% higher for the week so far – as the British Pound continued its worst month-on-month drop since the crisis of 1992, down almost 7% from this time in Oct.
"I've made at least 15% profit over the past year, so it's going well," says one UK gold investor, speaking today to London's Evening Standard.
"I look at what's happening to the stock market and people's savings in banks and I'm glad I'm in gold."
Figures compiled by Bloomberg News say the global credit crisis has now cost almost $1 trillion in financial losses.
Last month the International Monetary Fund (IMF) raised its estimate of final losses by nearly one-half to $1.4 trillion.
Following Wednesday's shock U-turn from the US Treasury on its "troubled asset relief program" (TARP), the government of Japan today offered $105bn to help the International Monetary Fund (IMF) finance its emergency bail-outs of emerging economies including Ukraine, Pakistan, Hungary and Belarus.
The G20 group of leading economies meets to discuss "Bretton Woods II" in Washington on Saturday, with India's prime minister – Manmohan Singh – set to demand a curb on the "economically damaging role of excessive speculative activity.
"When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."
Meantime in the Gold Mining sector today, former world No.1 South Africa reported a 17.7% drop in Sept.'s output compared with the same month last year. Overall mine production slipped only 3.5%.
South Africa's gold output has fallen by one-half since peaking in the mid-1990s.
"Global Gold Mining production actually peaked in 2001 and has since been declining," says Morgan Stanley commodity analyst Hussein Allidina.
"When I look at the demand side, as income growth accelerates, the consumption of gold for jewelry purposes increases."
Global demand for physical Gold Bullion – whether in the form of jewelry, coins or bars – "is underpinning prices at lower levels," says a note from Religare Commodities of India, the world's No.1 gold consumer.
"Dealers report strong buying in major bullion market India as the wedding season gets underway. Chinese investment demand is [also] gathering pace this year, with investment reaching 38.4 tonnes in the first nine months of 2008 against 24 tonnes for the whole of 2007, the China National Gold Corp said at a conference."