Price-sensitive gold still volatile at 300-mark
Julie Walker
PHYSICAL demand for gold dried up everywhere "east of Istanbul" when the price rushed to 325/oz earlier this month, according to Anglogold marketing director Kelvin Williams.
But good buying interest reappeared when the metal slipped back to 292/oz, underlining the price-sensitivity of gold as a consumer product rather than a paper-market play.
Speaking from London at the presentation of Anglogold's September quarterly results, Williams commented on the "very welcome" increase in the gold price after a quarter in which gold slipped to a 20-year low on negative sentiment.
This turned overnight when members of the European Central Bank announced a ceiling on their gold sales and leasing activity. The US Federal Reserve and the Bank of Japan followed suit and gold soared, although probably not much gold actually traded at the 340/oz peak.
"The market remains volatile today at around 300/oz, reflecting uncertainty over whether or not producers are likely to buy back parts of their forward price exposures."
Williams also refers to a degree of disorder, particularly in the gold leasing market. "Should official lenders of gold materially reduce the amounts of gold they are prepared to lend, this would bring about a quite different situation and is likely to lead to further sharp rises in the gold price."
Williams says Anglogold budgeted 20-million for market development of direct benefit to Anglogold. Of this, 9.5-million went to the World Gold Council and the balance towards Anglogold's own activities such as competition sponsorship and other promotions. Not all will be spent this year but the same amount has been budgeted for next year. Williams again criticised those "dozens" of gold producers - among them acquisition target Acacia Resources - who do nothing to promote their product.
Virtual Gold Research, the Internet-based research and consulting group, comments on the continued buoyancy of the US jewellery market and improvement in UK demand. The fact that 22-carat items are growing in popularity reflects the growing size and wealth of British Asians.
Asia itself is not such a pretty picture, according to Virtual Gold. "If we take six big eastern destinations as bellwethers, the trend still looks far from robust. Total cumulative imports into these markets for January-August were still about 16% short of the comparable period last year."
Virtual Gold says the picture is patchy. The strongest recovery has come from Singapore, where gold imports have doubled. Japan's are up by 46% and Taiwan much the same. But these figures are poor compared to 1997's boom times.
Dubai's disappointing trend deserves to be qualified, having suffered because India can now import more gold openly and directly from Zurich and London rather than via the traditional Dubai route. India's figures are never promptly released.
"Perhaps the sorriest story of all is Hong Kong, where bullion trade is looking sickly. At under 100 tons, imports to end August were down by over 50% on last year and 64% on 1997. If this is what recession in Hong Kong and deflation in China can do, consider the potential of a currency devaluation. Gold producers must be praying that Beijing sticks to its resolve to keep the renminbi yuan stable."
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