[miningmx.com] — ON THE evidence of renewed enthusiasm for gold-
backed exchange-traded products (ETPs), the fortunes of the yellow metal – largely
unfathomable at the best of times – appear to be improving again. The price of gold is
currently at $1,775/oz, compared to the $1,550/oz in July.
If you follow the likes of celebrity investors, such as George Soros, physical gold is an
interesting proposition. In the second quarter, Soros increased his gold exchange-
traded fund (ETF) exposure by 50%, mostly in the SPDR offering, a New York-listed
product and at $68bn the gold industry’s largest ETF. He wasn’t alone.
Paulson & Co, led by John Paulson who made a fortune correctly anticipating the
property bubble in the US in 2008, lifted his gold ETFs 26% in the quarter.
As a result, net global investment in gold ETFs increased by about 85 tonnes (2.9m
oz) year-to-date, the highest level of investment this year. The outcome is a
combined holding in ETPs of 2,389.9 tons (84.3m oz) as of end-August, equal to some
$126bn in investment. According to SBG Securities, the migration to gold is largely
predicated on the prospect of rising inflation – a view that is echoed throughout the
broking world.
The $2bn JSE-listed New Gold Debentures, our only domestically listed gold ETF, is
kindling similar interest from investors.
According to Vladimir Nedeljkovic, at Absa Capital, which helps administrate the New
Gold Debentures, growth in listings of the debenture are on the rise. “Since the end of
May, we have had creations totalling some R2.5bn in investment,’ says Nedelkjovic.
This includes R1bn of New Gold listings, or “creations’ as Absa Capital terms it, since
September, suggesting there has been a surge in gold interest in the last month ever
since the US Federal Reserve supported a fresh round of quantitive easing, known as
QE3. “We expect to list another R100m in the next few days,’ says Nedeljkovic. The
outcome is net investment in New Gold of some 120,000 oz (3.4t).
Gold equities, however, remain under the hammer. The expectation is that the labour
disputes will eventually be settled through a quantum increase in wages and then
force high-cost operations to be closed with AngloGold Ashanti’s Savuka and Great
Noligwa, Gold Fields’ Beatrix and Target 3, as well as Unisel’s operations of Harmony
Gold considered the most vulnerable. Were these to be closed, about 577,000 oz
would be taken out of SA’s supply.
– Finweek
