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Source: Times Online
Demand for gold smashed the previous record in the three months between July
and September as fearful investors switched funds from the stock market and
savings into ingots and coins, often storing them at home as their trust in
banks fell.
New figures from the World Gold Council (WGC) show that investment demand for
gold rose 56 per cent to 382.1 tonnes for the third quarter as investors
sought safe havens away from the stock market turbulence.
Dollar demand for gold reached a record of $32 billion (£21 billion) in the
third quarter – 45 per cent higher than the previous record, set in the
second quarter of this year, according to the data compiled by GFMS, the
researcher, for the council.
Philip Olden, managing director of the WGC, said: “A lot of this is being
driven by retail investors in Europe, who have been scared off the stock
market. They are either taking their gold bars and coins home or putting
them in safety deposit boxes at the bank.”
The market turbulence of the summer and early autumn coincided with falls in
the price of gold during July and August, after it hit its record peak of
$1,023 in March, which encouraged people to buy back into the precious
metal.
European investors bought a record 51 tonnes of gold bars and coins as
European banks reported huge write-downs and France became a net investor in
gold for the first time since the early 1980s. There has been a shortage of
gold coins as the fabricants who make them did not anticipate the high
demand, according to Adrian Ash, head of research at Bullion Vault.
The United States, India, Switzer-land and Germany reported the biggest rises
in gold investment as Lehman Brothers collapsed and the US Government
announced it would have to bail out the banking system.
Gold is easy to invest in for individuals who might find a broker too pricey,
as they can buy gold coins and bars through online dealers. Turnover at
Bullion Vault, which allows retail investors to buy 400oz ingots, rose five
fold in the year to October 31.
Demand for gold jewellery rose, with total jewellery consumption in the third
quarter climbing 8 per cent from the same time last year to 647.6 tonnes,
mainly because of higher consumption in India. The festival of Diwali in
October keeps Indian consumption, which rose 29 per cent, high.
UK consumers spent £90 million on gold jewellery in the third quarter, 2 per
cent below the figure spent during the same period last year, indicating
that the credit crisis has not hit gold jewellery as badly as cheaper items
in recent months. Sales at Ernest Jones, the high street jeweller which
sells at the low-to-middle end of the market, fell by 3.3 per cent between
August and November.
At the same time, demand for gold in industry and dentistry fell by 11 per
cent to 103.7 tonnes amid weaker buying from the electronics sector and a
long-term decline in the use of gold to replace teeth.
The price of gold spiked at $910 per ounce in early October and has since
fallen to about $740 per ounce, as cash-strapped hedge funds have been
forced to sell assets. The WGC said: “Gold is one of the few assets
remaining that could be sold at a reasonable price to meet margin calls on
other, worse-performing assets.”
Peter Spina, an analyst for Gold-Seek.com, said: “Funds that would like to
keep their asset of last resort are being forced to sell. This is causing
weakness in the paper gold market price, but it is not a true reflection of
the physical market.
“There will be more victims of the fund collapse and more forced liquidations
even if it requires selling your most desired assets such as precious
metals. Once this process works itself through, the true market prices for
gold will readjust.”
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