Gold prices could stabilise at $850-$950 in a year with measures to cushion the dollar against its current slump expected to yield results by the second half of 2008, according to experts from the financial and commodity trading sectors.
Speaking at a panel session after presenting their views on gold price trends during the 6th Dubai City of Gold conference in Dubai, the experts also called for more integration of the physical trade in gold with commodity trading and for a diversified investment approach in the precious metal.
James Steele, Chief Commodities Analyst at HSBC, said gold and dollar have always traded inversely, adding that de-pegging currencies from the dollar wouldn’t bring down gold prices. “If it’s not dollar, it would be euro and then gold will trade inversely with the euro and for gold price to come down, the euro will have to be strong. Presently, commodity prices are strong, favouring gold. This is a break from earlier credit crunches in which commodity prices slumped with the dollar.”
John Hathway, Senior Managing Director at Tocqueville Asset Management made a strong case for gold shares. “Gold shares, or equity interests in the business of mining, are capital intensive and shareholder returns are dictated by gold prices. In addition, there is a strong component of social responsibility in this investment as gold mining is done in an environmentally compliant way and helps the uplift of economically disadvantaged communities.”
“Gold shares are also cheaper and provides long term options on gold. By buying the shares of selected mining companies an investor gets longer exposure to gold over a longer timeline at a lower cost,” Hathway added.
According to Jeffrey Rhodes, Chief Executive Officer, INTL Commodities, the regional gold market needs innovative financing solutions to sustain robust sales as well as growth. “Traditionally banks have based their risk assessment and credit limits on audited balance sheets of the client. Well structured and imaginative financing, like inventory based financing, will reduce borrowing costs and promote growth in the region’s wholesale trade. Crucial to this approach is for banks to take ownership of the gold jewellery and be comfortable that they have legal title to the assets and that the goods are kept in a safe, secure and independent location.”
Ross Norman, Joint Managing Director of TheBulliondesk.com cited exchange-traded funds (ETFs) as the biggest change currently taking place in the investment realm of gold. “ETFs have been growing 20%-30% year on year. With more pension funds and industrial funds moving into the gold market ETFs will grow significantly,” he said.
However, panelists also cautioned investors not to base their projections entirely on ETFs. “The phenomenal success with gold has spawned ETFs in other sectors. We may see many more in the near future, including ETFs on agricultural products,” reminded Steele.
The close co-ordination and co-operation between Dubai’s gold traders and the government won a special mention from Kelvin H. Williams, Retired Executive Director of AngloGold Ashanti. “Dubai’s gold trade should strengthen their close engagement with the government in all sectors as it has been proven to be a successful formula,” Williams said.
Started in 2003, the Dubai City of Gold conference is today one of the leading events for the global jewellery industry and the only one of its kind in the Middle East & North Africa region, one of the fastest growing jewellery markets in the world. The sixth conference, which opened on April 12th, is the largest to date, having brought together over 500 delegates from the retail, mining, production and investment segments of the industry.
The City of Gold Conference is being held in association with the Dubai Multi Commodities Centre, with Transguard and ABN Amro as key sponsors and Standard Bank, HSBC and National Bank of Dubai as support sponsors.
About Dubai Gold and Jewellery Group (DGJG)
Formed with the support of the Dubai Department of Economic Development in 1996, the Dubai Gold and Jewellery Group (DGJG) is a trade association with over 700 members representing all sectors of the trade, including bullion trade, manufacturing, wholesale and retail. The Group has since then evolved into a prestigious trade body committed to developing and sustaining Dubai’s status as the ‘City of Gold’. It also leads the campaign to position Dubai as ‘The Jewellery Destination of the World’.
DGJG represents the interests of the trade through liaising with government organizations. Its Board of Directors include representations from Dubai Customs and DSF committee. The Group also works closely with international organizations like the World Gold Council, the World Diamond Council, the International Gemological Institute (IGI), High Diamond Council (HRD) and CIBJO (The World Jewellery Confederation).
