Going for gold

The Phnom Penh Post
http://www.phnompenhpost.com/

Written by Trevor Keidan
Monday, 25 May 2009

With many investments still looking uncertain, in-demand gold remains a steady bet.

GOLD looks set to regain its shine as the US dollar comes under increased pressure amid renewed doubts over the United States economy.

On Friday, gold was near a two-month high at US$951.75 per ounce after reaching $955.95 earlier in the week. The increase in the price of gold was assisted by the commodity's status as a safe-haven in the face of the weakened dollar as well as the resurfacing of doubts over the state of the United States economy.

Some reports suggested that the only factors holding the price of gold back were profit-taking and the long holiday weekend in the US. Other reports even suggested that gold will achieve a price per ounce of $1,000. Others were even more bullish suggesting a price of $1,200 per ounce.

One of the factors that is driving this new golden age is uncertainty over the economy. Despite the fact that stock markets around the world appear to have staged rallies of late, there are still doubts over the US (and indeed the global) economy.

Although some are saying that the worst is over, others claim that there is more to come - and it could be worse!

There is talk that US banks are still undercapitalised despite faring as expected during the much-touted recent stress tests. There is also talk that banks are still not offering credit which is essential to start the economy moving again.

In addition, there is speculation that what happened to the residential property market could also afflict the commercial real estate market - but on a bigger scale. There is significantly more money invested in the commercial sector than the residential sector.

Add to this US jobless claims continuing to rise, and unemployment in the world's largest economy creeping towards 10 percent, and things look decidedly shaky. This does not bode well for the future of the dollar, or indeed stocks, but could be good for gold.

Something else that's good for gold is the report that China has secretly been buying up the commodity recently. In fact, China has been shying away from the dollar as a reserve currency in favour of the precious metal.

China currently owns the largest foreign-exchange reserves in the world. An estimated two-thirds of the country's reserves are in dollars.

However, recently China has made no secret of its desire for a change of international monetary policy and a move away from the dollar as the world's reserve currency. China made its opinion known at the G20 summit in the United Kingdom in March and has since followed up by backing away from the dollar while quietly buying gold.

According to some reports, China's gold reserves are still not as large as those of the US or other developed countries, but they are growing.

The Chinese are also still buying dollars - just not as many.

So, how do we get into gold? As ordinary investors, there are a number of ways. In Cambodia we could buy jewellery such as bracelets, necklaces or rings. We could also buy bullion in the form of bars.

Those with trading accounts can buy into mining stocks listed on major exchanges. There are also mutual and Exchange Traded Funds (ETFs) that specialise in gold.

The world's largest gold-backed exchange-traded fund is the SPDR Gold Trust GLD. It can be bought and sold like shares in a stock-market account. Last week, it was on the rise before taking a pause towards the end of the week due to profit-taking and the long holiday weekend in the US.

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Trevor Keidan is managing director of Infinity Financial Solutions. Should you wish to contact Trevor send an email to tkeidan@infinsolutions.com.