Business World

Monday 18 December 2017

Gold on the rise as world economic crisis rolls on

Colm Kelpie

Colm Kelpie

GOLD has thrived as the world despaired and some predict that prices will continue onwards and upwards.

Gold has remained remarkably resilient during arguably the worst financial crisis the world has seen since the Great Depression.

As the financial sector came close to collapse during the recession, gold seemed to have the greater appeal as an investment option.

In the final three months of 2012, the average gold price reached a record level of $1,721.8 (€1,322) a troy ounce.

That image took a bit of a dent at the start of the year as prices tumbled as confidence about the global economy appeared to be rising.

But it may already be bouncing back.

Gold rose nearly 1pc yesterday after a top European Central Bank official said the eurozone crisis was not over.

Bundesbank chief Jens Weidmann, also a member of the ECB Governing Council, said the German central bank had set aside billions more against what it deemed risky ECB moves.

The metal briefly rose near $1,600 an ounce, a near two-week high.

In value terms, demand for gold last year reached a record of $236.4bn (€181.4bn) with global gold demand in the final three months of last year at 1,195.6 tonnes – up 4pc on the same period the year before.

India and China remain the world's gold gobblers, and although demand dipped slightly in India last year, consumer sentiment towards the precious metal remained high despite attempts to curb the appetite.

Investment demand in China was up 24pc in the final months of 2012 compared with the same period the year before.

Global authority

The World Gold Council – the global authority on the metal – predicted that demand would continue to increase, irrespective of "short-term price fluctuations".

"We believe that any movements in the gold price are likely to remain in a range similar to that which we have seen in recent months, and our view for 2013 is that we will see modest, but continued, growth in the world's two major gold markets of China and India," a spokeswoman said.

"In addition, we do not anticipate any drop-off in the appetite of emerging markets' central banks for gold, while the fundamental debt problems in the US, UK and eurozone remain unresolved."

So is it worth investing? The World Gold Council believes so.

"A potent wealth preserver, gold's stability remains as compelling as ever for today's investor," the council said.

But analysts are hedging their bets and predicting that any potential lack of buying interest in gold investment products could trigger more pullback in prices.

"Prices appear to be building some mild upside momentum, but until liquidation in gold exchange-traded funds ceases, we do not expect too much on the upside for gold," said James Steel, metals analyst at HSBC.

Irish Independent

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