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Crisis could hike gold to US $ 1,080 an
ounce in 2009 |
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Gevernment reactions
to the global downturn are now set to propel an investment boom
in gold but the jewellery sector's demand for the precious metal
is expected to slide as its price soars |
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GFMS,
the influential London-based gold consultancy, has reversed
its forecasts for gold in 2009 to predict an average price
of $915 and ounce and peaks as high as $1,080.
Only last
year GFMS was wary about the gold market, which it saw going
bust in 2009 if investment demand dried up.
The dramatic
upheaval in the global financial system changed everything,
said GFMS executive chairman Philip Klapwijk.
"The
main reason we changed our take is the response of governments
to this crisis, " he said.
"We would
not have suspected such remarkable government spending pledges,
and the speed (with) which the US cut interest rates. We thought
we would have had a more orthodox policy response."
With the U
S and other and governments pledging trillions of dollars
in fiscal spending while central banks do everything they
can to stimulate the economy and calm financial markets, Mr
Klapwijk said the end result is likely to be inflationary
pressure and a weak U S Dollar - trends that are great for
gold.
Investors
are expected to turn to gold as a reliable store of value,
said GFMS, but the length of the gold boom will depend on
how long government and central banks accommodate it.
The current boom
in gold prices has been driven entirely by investment demand.
Jelewellery and fabrication demand have plummeted with high
prices. GFMS expects the trend to continues, predicting that
jewellery demand will fall 11.1% in 2009 while net investment
demand rises 89.4%.
Any weakness seen
in demand is expected to be offset by weak supply. Overall
supply is projected to drop 0.6% thia year to 1,888 tonnes.
Mine supply has
been fairly flat for a number of years, and GFMS expects that
trend to continue. An exploration boom in recent years turned
up very few great discoveries and junior companies are now
hoarding cash and fighting for surival.
"Mine production
is not going anywhere. I think it is on a flat trajectory.
In the long term, it could even be down, "Mr.Klapwijk
said.
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With few sources of new supply, he does not expect that gold
will fall back to its historic lows of around $250 an ounce reached
early this decade. But prices could sink back to the $500 range
if big gold holders such as exchange-traded funds sell into the
market.
Despite
rising prices, World Gold Council research shows that gold jewellery
was still the most popular item for women's discretinary spending
in 2008.
The
survey, what Women Want: global Discretionary Spending Report, was
conducted by independent research firm, GFK, in the key gold jewellery
markets of India, China, Saudi Arabia, Italy, Turkey and the US.
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Last conducted in 2005, it examined the attitudes of nealy 7,500
women, aged between 15 and 65, to luxury items and consumables,
exploring their views on product attributes, price and competition
for discretinary spend.
World Gold Council managing
director Philip Olden said: "Despite a volatile and rising
gold price, gold jewellery has maintaineed its global positionas
the most popular item chosen by a woman spending her discretionary
income on herself.
"It is clear that
gold's inherent and lasting valuesets it apart from other products
and this benefit, combined with its enduring emotional appeal, are
major drivers of women's purchasing." |
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Itaian jewellery confronts slowdown |
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Last year's market slide was inescapable at one of first
fairs of 2009, but the organisers found grounds for optimism in
the way Italy's gold jewellery sector is facing up to the challenging
context
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\/icenzaoro First, promoted by the Vicenza Fair, closed on
18 January after a week that confirmed the tough challenge
facing Italian gold jewellery.
While booking were
up on the 2008 edition ofthe trade show, the event’s
final figures revealed that only 15,500 operators attended
— a 30% slide on last year. The downturn in foreign
buyers was even steeper.
According to the
show team, contractions in trade were in line with the overall
decline of export markets. Visitors from the United States
— where Italian imports slumped 28% over 2008 —
saw the biggest fall. Buyers from Turkey and ex—Soviet
Union countries were also significantly down.
The global jewellery
market plunged 22% in the first six months of last year, said
the show organisers, and maintained its descent over the rest
of the year.
But in its show
report, Vincenzaoro blamed Italian gold jewellery's structural
problems - such as import duties and competition from countries
with cheaper labour - as well as global recession for the
bleak figures. |
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Yet the team spotted glints amid the general gloom. According to the
trade fair’s organisers, some specific products withstood the
negative trend.
ln particular. the trade
show - reports success with the Glamroom preview and great interest
in T-Gold, the international show for gold jewellery production technologies.
Vicenzaoro First also reported
"a wealth of new ideas, with the presentation of numerous unusual
collections featuring innovative design and technology."
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In the view of the show, the positive attitude of exhibitors showed
their determination to overcome the challenging market according to
the show team, in their applications to participate in upcoming events
like About J in Milan, Vincenzaoro Charm and J CK in Las Vegas. |
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