Last Updated :
28 July 2010 at 16:30 IST
Future perfect for Gold for years
MUMBAI (Commodity Online): With gold prices declining this week substantially following global cues, the future of gold is safe if the World Gold Council report is anything to go by.
According to WGC, though gold topped $1,250 per troy ounce this quarter and reached record highs in dollar terms, the metal has still some steam left before it pauses.
And the yellow metal will continue to be one of the most sought after commodities in the world despite prices spiraling by almost 11% in dollar terms and 23.1% in euro terms during the second quarter of 2010 calendar year that started in January.
Between April-June 2010, gold investments in exchange traded funds (ETFs) zoomed to 273.8 tonne, the second largest quarterly inflow in record. In India — the world’s largest consumer of the yellow metal — demand skyrocketed by a whopping 291% to 147.5 tonne, helped partly by a strong rupee, which made imports cheaper.
Interestingly, the WGC report states that though gold reached record highs during the second quarter of 2010, its price relative to other asset class does not appear to be overvalued by historical standards.
WGC said the commodity is less valued relative to international equities as measured by the MSCI World ex US index, the S&P Goldman Sachs Commodity Index or even the Barclays Capital US Treasury Aggregate.
Experts said WGC report indicates that though gold topped $1,250 per troy ounce this quarter and reached record highs in dollar terms, the metal has still some steam left before it pauses.
On the terms of volatility too, the WGC report said that in general, annualised gold volatility in May and June remained around 18%, above its historical mean (gold’s 20-year price volatility is around 15.8%).
The report noted that a firm Indian rupee also helped in keeping demand robust as it made imports cheaper. Going forward the WGC report expressed hope that gold’s appeal as a strong investment alternative will continue to grow as shown in the second quarter of 2010 because of investor’s interest in asset diversification, protection against downside rise and wealth preservation.
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