More Investments Sought in Gold
Source: tradearabia.com (4/13/08)
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.
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 Sixth Dubai City of Gold conference in the emirate, 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.
HSBC chief commodities analyst James Steele 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.”
“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,” said John Hathway, Senior Managing Director at Tocqueville Asset Management.“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,” said Hathway.
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,” he said.