The global financial crisis has created so much uncertainty that gold is shining even more brightly. Seen as a safe haven, some observers are predicting that gold could rise to $2,000 an ounce. Yesterday, State Street Global Markets and World Gold Trust announced that the SPDR Gold Trust (GLD) is now the second-largest ETF in the world, surpassing $30 billion in assets. And last week, the World Gold Council noted that demand for physical gold-bars and coins-rose 87% over last year with shortages in many parts of the world.
As economic uncertainty climbs, an increasing number of investors are adding more gold to their portfolios," says Natalie Dempster, Head of Investment, North America, for the gold council. "Assets in the trust have increased by more than 60% in the last six months. This growth underscores gold's safe haven appeal and its recognition as an excellent portfolio diversifier among a wide array of financial advisors and investors."
Identifiable investment demand for gold, which includes ETFs and gold bars and coins, was 64% higher in 2008 than in 2007, equivalent to an additional inflow of $15 billion. Last year gold price averaged $872, up 25% from $695 in 2007. They are now hovering around $1,000.
But adverse economic conditions across the globe and volatile gold prices also meant that people bought less gold jewelry. Figures compiled independently for the council by GFMS Limited showed jewelry demand up 11% in dollar terms at almost $60 billion for the whole year, but down 11% in tonnage terms at 2,138 tons.
Industrial demand in 2008 was another casualty of the global economic turmoil and was down 7% to 430 tons from 461 tons in 2007. With the electronics sector the main source of industrial demand, the council said, reduced consumer spending on items such as laptops and mobile phones hurt gold demand.