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GATA press release cites support from gold fund manager Hathaway
By John Waples
Sunday Times, London
August 26, 2001
Don't throw your gold trinkets away just yet.
As an investment, the metal may have been horribly out
of fashion for the past decade, but with world
economies continuing to slide, gold could be about to
stage a revival.
There are already signs that sentiment may be changing.
The big gold miners, Barrick, Newmont, and AngloGold,
have this year been among the better performing stocks
on the New York Stock Exchange. So far this re-rating
has not fed through to the physical price of gold, which
remains stubbornly stuck in a $255 to $285 per ounce
(L 177 to L 198) trading range. But some metals analysts
believe it could soon break through the $300 barrier and
climb to $350.
Since the late 1980s, when gold hit $800 an ounce, the
price has been in steady decline. It has suffered from
the serial dumping of gold reserves by central
governments and the International Monetary Fund in
favour of bonds and other financial instruments.
The physical price may have fallen but, fortunately,
consumers, particularly in India, have not lost their
appetite for gold. Jewellery demand -- which accounts
for 85% of the market -- has risen 35% over the past
decade. Bobby Godsell, chairman of the World Gold
Council, says it is hard to find another sector where
retail demand has been as robust. For 5,000 years gold
has enjoyed the status of a quot;store of value,quot; but when
measured against the surge in equities over the past
decade the metal has lost its sheen. In the more sober
economic landscape we are now seeing, gold could again
recover its place in investors' portfolios.
There are other reasons why it could stage a revival.
Of all metal markets, the one for gold remains the most
fragmented. However, there are signs that it is
starting to consolidate, which will result in
producers, refiners, traders, and fabricators working
more closely. Ultimately, this could lead to two of the
big producers, AngloGold and Barrick, merging, which
would create a L 7.5 billion powerhouse.
Ross Norman, an analyst at TheBullionDesk.com, says
such consolidation has already taken place with
platinum, where four producers now dominate 90% of the
market. He believes gold needs to go the same way and
forge a closer relationship with its customers. On top
of this, he says there should be an increase in the
budget of the World Gold Council, whose role is to
promote jewellery and investment demand. This year it
has doubled to about $50m but still remains woefully
inadequate, at just 0.15% of the value of gold produced
New industrial applications need to be found for the
metal and there are signs that this is starting to
happen. Possible uses being explored include using gold
as a catalyst in the filters of cigarettes to mitigate
the harmful toxins in tobacco. If these take off, the
central banks that are still sitting on 32,000 tonnes
of gold will immediately stop jettisoning more
reserves. And if the dollar weakens further, some may
even start buying it back.