The Hindu : Business : Gold price volatility to continue

Online edition of India's National Newspaper
Wednesday, Mar 12, 2008
ePaper | Mobile/PDA Version

Business

Business

Gold price volatility to continue

Special Correspondent

Demand likely to be hit in first quarter, says World Gold Council

Gold ETFs to be rolled out in newer markets
To create an investment vehicle globally

— PHOTO: PAUL NORONHA

RESHUFFLE AT THE TOP: Pierre Lassonde (left), Chairman, World Gold Council, Gregory Wilkins (centre), the newly appointed Chairman of the council, and James Burton, CEO, at a press conference in Mumbai on Tuesday.

MUMBAI: Gold production globally has been falling for the last five years and will continue to do so in future as there are no new significant gold deposits that have been found anywhere in the world, according to Pierre Lassonde, outgoing Chairman, World Gold Council (WGC).

Mr. Lassonde was in India to chair the board meeting of the WGC, held for the first time in India, to elect a new chairman. Since gold prices move in inverse proportion to the U.S. dollar, he said the decline in the U.S. currency being witnessed was similar to what happened in the 1970s. “This decade, we are likely to see the Chinese Renminbi go from 8.4 to 4.2 to the dollar and gold move up from $700 to $1,400 (10 gram). The Indian currency will no doubt strengthen and the volatility is already embedded in gold prices, so volatility will continue in the foreseeable future.”

Gregory Wilkins, the new Chairman of WGC, said these were exciting times for gold and the challenge was to continue the momentum. “Five years ago, gold was in decline but demand for gold jewellery since then has gone up from $33 billion to $80 billion annually.”

Mr. Wilkins said one of his objectives was to evolve the Gold Exchange Traded Funds (ETFs) which were successfully introduced three years ago and “roll them out in newer markets. These have created an alternative currency based on real demand and not derivative demand.”

Mr. Lassonde said the objective had been to create an investment vehicle equivalent to world-wide currency and globally, Gold ETFs have garnered 860 tonnes of gold. “If it was a central bank, it would be the sixth largest one in the world.”

Mr. Burton said current gold prices were no doubt high but in relative terms. “Over the last two years, as gold prices hit new plateaus, consumers have accordingly adjusted.

In India, gold jewellery consumers understand the value proposition of what they are buying. We can reasonably deduce that gold demand will be lower in the first quarter of 2008 as can be seen here and in the U.S. although China is quite robust. Given the speed with which gold prices have escalated, we are likely to see a ‘down’ quarter,” said Mr. Burton.

Printer friendly page
Send this article to Friends by E-Mail

Business