Angelos Damaskos, CEO, Sector Investment Managers and Fund Advisor, Junior Gold Fund comments on gold demand
In January and early February 2011 there was some consolidation in the gold price and, consequently, in the share prices of gold mining companies. Encouraging economic activity reports out-weighed the social and political unrest in Egypt and Tunisia and the uneventful bond auctions in Portuguese and Spanish bonds also contributed to optimism in the equity markets.
According to the World Gold Council, global gold consumption in Q3 2010 grew by 12% over the previous year. Demand for gold jewellery increased by 8% with four main markets – India, China, Russia and Turkey – accounting for 63% of global demand. Retail investment rose by 25% from Q3 2009 with the largest contributor being gold bars, which increased by 44%.
What is impressive in China’s growing demand for gold is the speed and scale of change. A recent survey indicated that China imported over 209 metric tons of gold in the first ten months of 2010, five times of what it imported in all of 2009. The World Gold Council predicts that Chinese demand in 2010 reached 600 tonnes, just behind India’s 800 tonnes of gold, meaning China and India collectively bought about half of total world mine production in 2010.
The World Gold Council and the Industrial and Commercial Bank of China recently announced a strategic partnership to help Chinese investors accumulate gold on a daily, dollar-averaging basis. The minimum investment is one gram of gold a day. The programme was launched in April 2010 and, during the first phase in a few selected cities; over one million accounts have already been opened with this one bank, collectively acquiring over 10 tonnes of gold. Retail investment plays a large and growing part in investment demand. Given the growing affluence among the Chinese and their traditional belief in gold as a store of value, this trend is set to continue.
We believe that the current economic optimism may be short-lived and that the fiscal problems of the developed economies will re-surface as a threat to growth. Gold should benefit again from such a scenario and its price may rise to new highs. The shares of high quality gold mining companies are likely to respond very quickly making it difficult to establish new positions. We, therefore, remain almost fully invested in companies with large reserves, growing production, solid balance sheets and top-rated management teams.
If you wish to speak with Angelos Damaskos, CEO, Sector Investment Managers and Fund Advisor, Junior Gold please contact Sally Moore or Saira Khan on 0207 726 6111.
About Sector Investments
Sector Investment Managers is an independent resources focused investment management company authorised and regulated by the FSA. It advises three open-ended fund products, Junior Gold, the Junior Oils Trust and the Junior Energy Fund, as well as providing advice and management for segregated accounts. Angelos Damaskos founded Sector Investment Managers in 2004 to provide investors with diversified access to the super-cycle in energy and commodities.
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RISK WARNING:
This material is directed only at persons in the UK and is not an offer or invitation to buy or sell securities. Opinion expressed whether in general or both on the performance of individual securities and in a wider economic context represents the views of Sector Investment Managers Limited at the time of preparation. They are subject to change and should not be interpreted as investment advice. Sector Investment Managers Limited and Capita Financial Managers Limited are authorised and regulated by the Financial Services Authority. Any investment in the Fund should be based on the Fund’s current Scheme Particulars, Prospectus or its Key Features document. Past performance is not a guide or guarantee to future performance and the value of investments and any income from them may go down as well us up, and you may not get back the amount originally invested. Issued by Sector Investment Managers Ltd.
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