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Gold- The Safe Storage in this Declining Economy?

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by - 11/3/2008 4392 Views

Gold prices and Demand- The recent report

South Africa is one of the world's major exporters of gold, platinum, coal, diamonds, aluminium, iron and steel. South Africa’s Global export revenue is hit by the economy slowdown and the resulting decline in precious metal prices. According to Mr. Cees Bruggeman-the chief economist of First National Bank “The Export revenue hit could be offset by the declining oil price, although falling rand strength could cause complications”.  The Wall Street Journal reports indicate that the credit crisis is contributing to the fall of commodities markets. The investors are considerably worried about doing business with financial firms that create complex derivative products pegged to oil, gold and grain markets.

gold3.jpgHowever, gold seemed to negate this opinion on the same day, when it rose to a 10-week high in London. Platinum and palladium fell on expectations that slower growth would sap vehicle producers' demand for catalytic converters. James Moore, an analyst of TheBullionDesk.com in London says that “The collapse in equity markets has left the metal well-placed for an end-of-week grand finale”.

Earlier last week, Graham Birch, the managing director of BlackRock Investment Management, told that “the Commodities Week conference in London that the global financial crisis had pushed mining stocks such as BHP Billiton and Anglo American down too far.” Most of the people consider Gold is considered as the safe storage of wealth. Prices of metals such as copper, tin, platinum, palladium and silver have slipped sharply as investors were worried that slowing economic growth would affect consumption. The current market shows signs of Platinum becoming less precious than gold for the first time since 1996, a sign that the global credit crisis is driving investors into a haven that is easily converted into cash.

"All industrial metals ended the week lower, with the RMB base metal index falling 10 percent during the week", says RMB research.

All these factors indicate slowing economic conditions in developed nations, including Europe and the UK, added to concern that the rest of the world may not be able to isolate itself from the slowdown in the US economy. However, though the equity markets are slipping down, Gold is still considered as a flight to safety. “The metal should continue to benefit from investor safe haven demand” says James Moore of TheBullionDesk.com.

Category : General

Tags : general, Gold, metal


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