Gold
From IntFX
One of the most precious metals till date, Gold is largely used in making jewelry, to prevent inflation in the economy by way of hedging and also as a great investment. Gold prices are always escalating – which can make for a good asset to invest in for the future.
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[edit] General uses
Gold is chiefly used for:
- Coinage
- Ornaments
- Jewellery
- Gilding
Green gold is generally used for jewellery. Green gold is an alloy of gold, silver and copper, and is graded from 14 to 18 karats. Coinage gold (USA) or standard gold (UK) contains gold and copper in slightly varied amounts, while Australian gold (Australia) contains silver instead of copper.
[edit] Pricing structure
Since 1968 the price of gold on the open market has ranged widely, from a high of $850/oz ($27,300/kg) on 21 January 1980, to a low of $252.90/oz ($8,131/kg) on 21 June 1999 (London Gold Fixing). The 1980 high was not overtaken until 3 January 2008 when a new record of $865.35 per troy ounce was set in the a.m. London Gold Fixing. On January 10, 2008, gold futures for February delivery was $884 on the New York Mercantile Exchange, erasing by $10 the previous record of $875 in 1980, and later it settled at $880.30.
Compared to the last year gold prices have risen by almost 6% - which itself is an indicator of the tremendous demand of this precious metal. The current price of Gold per ounce is around 731.3 USD per ounce (as per Gold Price exchange figures as on 4th October 2007)[1]. As on 4th October the LME (London Metal Exchange) recorded a rate of 725.5 USD per troy ounce[2]
[edit] Current consumption trends
Despite record prices, gold continued to appeal Indian investors throughout 2007 with total demand increasing 7 per cent to 773.6 tonnes from 2006.
Jewellery demand in 2007 accounted for 558.2 tonnes, a rise of 6 per cent from 2006. Net retail investment for the year rose 10 per cent to 215.4 tonnes, a release issued by the WGC said.
Investment demand continues to be encouraged by the rising price of gold, which generated returns of around 16 per cent in rupee terms during 2007. Indeed, during 2007, annual investment demand in India was the highest on record having more than doubled since 2004, the release added.
In China, total consumer demand reached 326 tonnes, a rise of 26 per cent as compared with 2006. China has now overtaken the US as the second largest volume retail market for gold jewellery after India, with demand for jewellery reaching 302 tonnes and surpassing 300 tonnes for the first time since 1997.
In Turkey, 2007 brought record overall demand for gold. Jewellery demand stood at 188 tonnes, its second highest annual figure ever, up 14 per cent from 2006. Net retail investment demand was up 2 per cent at 61 tonnes.
Strong growth continued in Russia with jewellery demand rising 11 per cent to set a annual record. Growth remained vibrant throughout the year with demand in Q4 nearly 25 per cent higher than the corresponding quarter in 2006.
India, the world's largest and also most price sensitive gold market, recorded a 64 per cent fall in demand on year earlier levels following 40 per cent growth in the first three quarters.[3]
[edit] Price forecasts
- UBS raised its 2008 gold price forecast to $760 per ounce from $650 per ounce and 2009 forecast to $700 per ounce from $550 per ounce.[4]
- Merrill Lynch said they expect gold to average $925/oz this year and $1,000/oz in 2009 (up from $750/oz and $800/oz respectively). They raised the long-term gold price forecast from $600/oz to $650/oz, beginning in 2013. "Due to higher forecasts for the 2008-2012 period, our 10-year average gold price has jumped from $655 to $800/oz.[5]
- Morgan Stanley, said in its 2008 gold price forecast that:
- Gold may average $800 an ounce in 2008. - Gold is expected to benefit from strong global growth and spreading inflation problems. - Growth in demand, particularly from an expanding middle class in the developing world, would continue to be the main driver of gold prices in the long run. - Inflation and dollar concerns have temporarily surged to centre stage. - Global growth was able to progress as it had detached, from the United States, which is braced for further fallout from the crisis in credit markets caused by problems in the U.S. high risk mortgage sector.[6]
- Credit Suisse has raised its gold price forecast for 2008 and 2009. The firm now has the yellow metal at $950/oz for 2008, up from its prior view for $700/oz, and $1,035/oz for 2009, up from $750/oz[7]
[edit] Major producers
After more than a century on the throne, South Africa has been deposed as the world's biggest producer of gold, with its estimated 2007 output, of 272 t, falling just short of the 276 t of the yellow metal produced by the new number one, China. While Chinese gold production increased by an estimated 12% year-on-year, South African mines produced 8% less gold than in 2006. According to GFMS estimates, global mine production contracted by about 1% in 2007, to 2 444 t. Peru recorded the biggest decline, with gold production falling an estimated 17%, to 167 t, while Indonesia and Brazil were the top gainers, with output rising by an estimated 18% and 16% respectively.[8]
[edit] China’s recent rise
It is predicted that solely due to China’s demand for Gold, the average price of the metal will climb up to 700 USD per ounce by the end of the year[9] . It is also predicted that China is going to outdo India in terms of its demand and consumption of Gold. Currently, China is ranked fourth in terms of its demand for Gold but within the next couple of years, the gold demand per year is expected to rise threefold. This signals an upward climb for Gold prices overall.
[edit] External References
- ↑ http://goldprice.org/
- ↑ http://www.metalprices.com/FreeSite/metals/au/au.asp
- ↑ http://www.rediff.com/money/2008/feb/14gold.htm
- ↑ http://uk.reuters.com/article/oilRpt/idUKWNA663520071008
- ↑ http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=46583&sn=Detail
- ↑ http://www.newswiretoday.com/news/25016/
- ↑ http://www.resourceinvestor.com/pebble.asp?relid=39733
- ↑ http://www.miningweekly.co.za/article.php?a_id=124692
- ↑ http://www.china-embassy.org/eng/xw/t342813.htm
