Investment Demand For Gold To Rise

Even so, the late 1980s, early 1990s may have been a golden age for investment in physical gold, he said. Investment demand for gold will rise most rapidly in countries just starting out on the liberalisation road and taking it gradually like India, he said.

Golds performance prompted a, residue of optimism heavily tempered with caution Warwick-Ching said in remarks prepared for the International Gold Markets conference at Istanbul on Trends, Patterns and Prospects for Investment in Gold. Critical events to change the investment pattern were price freedom for bullion in the late 1960s and the end of its monetary role in 1971, events whose importance for gold cannot be over-emphasised, when official institutions were still the biggest repositories for gold, he said.

 

While growth would be fastest where gold liberalisation ran ahead of other sectors, there were few such countries left, at least in Asia, where demand has been highest recently.

In 1980 investment bullion accounted for 44 per cent of all physical offtake and coins for 30 per cent. By 1995, investment demand was 16 per cent and coins only four per cent. Investment jewellery meanwhile has risen to three quarters of the total, he said, making it one of the great success stories for gold.

This growth had centred entirely on the markets of the East where jewellery consumption had been fastest and investment attitudes among jewellery buyers were commonest.

As a result the share of the Eastern markets in total investment offtake has risen from just over a quarter in 1980 to nearly 90 per cent last year...the share of North America and Europe has plunged from nearly two-thirds to 1980 to just over six per cent last year, he said.

The unifying theme in these disparate markets, the one common experience to most of the markets, had been liberalisation. Liberalisation of gold trading could reduce costs and stimulate demand but it had a downside. Gold liberalisation is a double-edged sword since a freer gold market is - has to be - a facet of liberalisation of the wider financial framework, Warwick-Ching said.