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“Gold proved its metal in 2008” – Gold Investment Digest

Posted on 21 Jan 2009

The latest issue of Gold Investment Digest published by the World Gold Council, claims that gold provided a safe haven for companies in 2008 giving a long term store of value for investors in record volume and outperforming many other assets in relative price and volatility terms.

Despite some unnerving months, gold ended the year on a firm footing recording its eighth consecutive annual price increase. The publication viewed the last three months of 2008 as a quarter of two halves. It said, “while distressed gold sales by some institutional investors meeting margin calls on other assets had a dampening effect on price in the first few weeks of the final quarter, by mid November broader recognition that the dire financial situation was likely to endure for some time, fears about the credit system and future inflationary impact of shifts in monetary policy and the dollar resuming its secular decline led gold to rally by around $150/oz.”  Gold then closed the year at $869.75/oz, up 4% from the same period in 2007.

It says that gold price volatility remained high by historical standards at the end of the year, at 37% (gold’s long-run price volatility being around 12.5%), although still below most other asset classes. Natalie Dempster, Head of Investment, North America for the World Gold Council said: “Impacted to a lesser extent by the financial crisis, which affected equities, and declining industrial demand, which affected physical assets, gold outperformed global equities and all major commodities during 2008.”

During the final quarter, investors turned to physical-backed gold exchange trade funds (ETFs) in large numbers, buying 96 t of incremental gold via ETFs.  December recorded the strongest monthly inflow into gold ETFs, with investors buying 44 t of gold. Investment in this vehicle of gold, monitored by the World Gold Council, now stands at around $33 billion. 

Dempster continues, “as we move into 2009, continued uncertainty over the financial landscape, combined with future inflationary fears resulting from interest rates cuts and quantitative easing by central banks, are likely to pique investor interest in gold further.”

Gold Investment Digest is a concise and comprehensive analysis of investment trends and economic indicators that influence investment interest in and the demand for gold and can be downloaded at http://www.gold.org