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Gold investment tops $35bn Posted: Mon, 26 Jun 2006 [miningmx.com] -- THE higher volatility in the gold price has been laid at the door of increased investment interest in the metal, according to analysts and investors at the London Bullion Market Association meeting, held in Switzerland. The gold price has increased from about $435/oz at end-June 2005 to more than $720/oz in mid-May. Seven days later, however, the gold price had shed more than $100/oz. It is currently trading at $585/oz. “Where there was once a single concentration of trading liquidity, there are now multiple platforms spread across the globe,” said Jeremy Charles, LBMA chairman. “We have futures markets, physical markets, ETF (exchange traded funds) on stock exchanges, commodity indexes ... and we even have ETFs on commodity indexes,” he said. “The effect of this has been to fragment liquidity and this, in my opinion, has helped to create a much greater degree of volatility than we have seen at any time in the past,” said Charles. According to Cyrille Urfer, head of fund research and multi-management at Lombard Odier Darier Hentsch, the improvement in gold product choice has helped popularise the metal among general investors. There are now 48 funds in “the gold equity universe” of which 12 were launched since 1999 representing $4.2bn, said Urfer. “The sum of all the assets under management of these funds is worth more than $35bn,” said Urfer who included in his calculation investments in existing funds. “The universe has expanded very rapidly since 1999,” he said. Investment in commodities is thought to have increased ten-fold since 2003 to about $120bn (the figure varies). The feeling is that if pension funds were to become involved in the market, the amount under management in commodities would sky-rocket: 3% of pension fund investment would be equal to $500bn. Phillippe Hildebrand, member of the governing board at the Swiss National Bank, said the medium term gold price turned on this kind of investment. “Of course, mining and processing demand have an important role in the long term, but the medium term price equilibrium depends heavily on the investment or disinvestment decisions of the private and public sectors,” he said. Traditionally, investors could buy in to products that offered exposure to a basket of metals or a commodity index. But there was a trend to move away from such products, said Arun Assumall, European head of investor sales at Goldman Sachs.Free news alerts: click here to subscribe
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