Gold Rally on Central Bank, Investor Buying, Coutts
Posted by James Randolph on August 22, 2012
August 22, 2012 – The gold bull market will extend its run as emerging-market central banks and investors increase holdings to protect themselves against weaker currencies in a projection by Coutts & Co., the private banking division of the Royal Bank of Scotland Plc.
Gary Dugan, chief investment officer for Asia and the Middle East explained in an interview in Singapore that gold is a positive in the view of the bank because major currencies around the world lack credibility.
This week, speculation that central banks including the US Federal Reserve will issue fresh stimulus that will weaken currencies brought investment holdings of gold to an all-time high. Among the investors jumping into the gold market and increasing their holdings are billionaires George Soros and John Paulson, who both increased stakes in the SPDR Gold Trust, the biggest gold-backed exchange-traded product. Soros and Paulson both took very large positions in the second quarter, according to SEC filings.
Dugan is quoted as saying people will naturally gravitate towards gold in this market, with the buyers being emerging market central banks and individual investors seeking some stability topping off the market.
Gold for delivery traded at $1,644.65 per troy ounce late in trading in Singapore. Gold has been on an 11-year bull market run that brought it to an all-time nominal high of $1,921.15 per troy ounce on September 6, 2011. Holdings in ETPs, which include the SPDR, jumped to a record of 2,437.495 metric tons yesterday, according to data collected and analyzed by Bloomberg.
Central banks will purchase almost 500 tons this year since becoming net buyers of gold in 2009, per the most recent report from the World Gold Council. Central banks increased holdings by 254.2 tons in the first half, according to the council, with central banks in Russia, South Korea, and elsewhere increasing holdings.
The global economic slowdown, partially driven by the European debt crisis, impacted demand in the second quarter with consumption dropping a full 7.1 percent, as reported by the council. Last year’s biggest buyer market, India, dropped 56 percent to 131 tons in the second quarter, largely impacting global demand.