Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Gold related post ***


George, as our resident authority on the FarEast, can you opine on the author's claim that the Chinese population has a trillion dollars in savings accounts.

Even when taking into consideration their huge number of inhabitants, that seems like a lot of money for what I've always considered to be mostly a peasant population.


RPT-Gold shines through stocks gloom, attracts investors
Wed April 16, 2003 02:31 AM ET
By Clare Black

ZURICH, April 16 (Reuters) - Global economic and political uncertainty may be bad news for stock markets but safe-haven gold, once the pariah of tech-stock obsessed investors, may be about to glitter again, according to global fund managers.

The traditional safe haven in times of trouble has started to show up as a blip on the radars of fund managers who have shunned the asset in recent times.

"Diversification is back in fashion," Graham Birch, chief investment officer of Merrill Lynch Investment Managers Natural Resources team, told delegates at a European Gold Forum on Tuesday.

Birch said that during the first three months of 2003, gold-related information requests from institutional investors accounted for five percent of total queries addressed to Merrill Lynch, up from 2.8 percent in 2002 and not even one percent in 2001.

"We have had some very strong fund flows and not just from gold bugs...or punters who believed in the gold price going up one day, although they didn't know when that was...More recently it has been much more strategic investment," Birch said.

Gold was one of the best performing financial assets in 2002 and prices soared to their highest in 6-1/2 years, at $388.50 an ounce, in February in the run up to the war in Iraq.

Since that time, prices have fallen back to around $325/oz, although many analysts believe the rally may have further to run if the U.S. economy goes into recession and drags the dollar back down.

Frank Holmes, chairman and chief executive officer of investment advisor U.S. Global Investors that manages around $1.2 billion, said that gold stands to greatly benefit from a convergence of macro-economic and industry factors which had not been seen for some 50 years.

He said the United States' war on terrorism, a weak economy combined with low interest rates and high deficit spending could see gold strengthen again once the elation of a relatively speedy war in Iraq faded, and investors began to concentrate on economic realities again.

Looking back to the first Gulf War, Holmes said the real cost of the conflict did not show up until one year later when the deficit ballooned and the dollar weakened.

Spot gold in New York ended at $324.90 an ounce on the COMEX exchange.

BULLION, NOT SHARES

Despite the upturn in investor interest, most of them still place their money in gold equities.

Birch, who runs the UK's only gold (equity) fund, said there were more opportunities in gold bullion, but recognised that it would take a long time to get people used to investing in physical gold again.

China, the perceived panacea to slowing Western consumer demand in commodity markets, could also offer great opportunities, especially since the recent deregulation of its gold sector.

Birch said the Chinese population, with around one trillion dollars worth of savings, could offer huge potential.

"If they put just 10 basis points (0.1 percent) of those savings into gold, that would equal 100 tonnes," he said.

Total world investment demand for gold is estimated at around 400 tonnes.

Another UK-based investment manager, Trevor Steel of Baker Steel Capital Managers, said that hedge funds had also started to penetrate the gold market via mining finance and that more of the current $600 billion allocated to hedge fund strategies could flow into the sector.

http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=2573681

Have a good evening,
Dan