Gold Investment, Prices at All Time High, Says Gold Expert
By Daniel at 7 July, 2009, 8:48 pm
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In the following brief excerpt from the 113 page report, Jeffrey M. Christian, Managing Director and Founder of CPM Group, discusses the outlook for the sector and for investors.
TWST: Please discuss the performance of the gold price this year and how it’s reacted to the global economic crisis?
Mr. Christian: The price of gold started the year around $880 an ounce. It had fallen to that level during the financial crisis. It rose to about $1,007 on an intra-day basis in February, which was probably the worst part of the recession. There was an extreme amount of economic uncertainty and fear about the stability of banks. As the year progressed, the gold price backed off. It’s basically traded between $870 and $990 since February. So it came down to about $870 in March and then it rose back to about $990 in May. Today it’s around $926.
TWST: This is still a relatively high gold price. Would you talk about the factors driving it?
Mr. Christian: Well, let’s start in the center and work our way out. If you look at the gold market itself, the single most important fundamental that’s been driving the price up has been very strong investment demand. Investors have been buying more gold in more parts of the world for a longer period of time than ever before in history. This is over the last eight years. The bull market really started in 2001.
TWST: You say investors are buying more gold than ever before. Are you talking about the physical metal?
Mr. Christian: Right. They are also buying gold derivatives: gold futures, forwards, options, gold-backed notes and all sorts of other gold assets, too. Just talking about the physical metal over the last eight years, we have seen investors buy more gold over a longer period of time than ever before. This is not your garden variety bull market.I like to think about it from a long-term perspective. I think there are two major, fundamental trends that are shifting in the gold market. One is a real sea change in the way investors work, which is causing them to buy more gold on a sustained basis than ever before. The other is a major shift in central bank attitudes toward gold. Central banks have been sellers of gold for about the last 40 years. But they seem to be moving toward becoming buyers of gold.
TWST: So the conventional wisdom that gold would no longer be the traditional hedge against inflation is being disproved?
Mr. Christian: For 5,000 years, gold was an integral part of the monetary system and it was the major financial asset. And then for 40 years - 1968 to 2008 - it had been denigrated as an asset that only the crazies got involved in. Gold really had no role in a modern portfolio or in a modern monetary reserve system run by a central bank. In contrast, over the last several years investors and central banks have begun looking back at the past 40 years and thinking they may have been an aberration; and they are restoring gold, if not to its monetary role, to its financial role.
TWST: Will we ever return to a gold standard?
Mr. Christian: I don’t think that we will see a gold standard. I think we will see a restoration of gold as a monetary reserve asset. But it doesn’t make economic sense to fix the currency exchange rates to the price of gold. So I don’t think that we will see that.
http://finance.yahoo.com/news/Gold-Investment-Prices-at-All-twst-57462678.html?x=0&.v=1
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