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Price of gold continues to rise and shine

16TH OCT Price of gold continues to rise and shine

By Ellen Kelleher
Published: October 15 2010 18:07 | Last updated: October 15 2010 18:07

The gold price hit another high this week as concerns mounted about the economic outlook, leaving investors facing the question whether to buy gold bullion or shares from the mining companies themselves.
Mining companies across Australia, South Africa and Latin America are drawing attention from buy-and-hold investors who subscribe to the theory that metal prices will be driven higher for decades to come, thanks to soaring demand from the emerging middle-classes in China, India and Brazil. Scores of speculators, meanwhile, are buying into gold-backed exchange-traded funds, hoping to see further upside in the gold spot price, which set another high of $1.387 a troy ounce this week.

Opinions vary on whether mining or bullion is the superior bet. “At times, mining stocks and the gold price behave in very different ways,” points out Justin Urquhart Stewart, director with Seven Investment Management, who has turned bearish on the gold price. While rising spot gold prices push up mining companies’ revenues, their profit margins can be impacted by new taxes and regulations, higher costs and production problems. Just this week African Barrick Gold, the FTSE 100 miner, drew attention to the difficulties miners face when it cut its gold production forecast again after uncovering “organised and systematic” fuel theft at a Tanzanian mine.

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Indeed, the rally in gold is helping other precious metals, with silver hitting a 30-year high of $24.90 per troy ounce this week. Base metals have also performed well, with forecasts for the copper price looking increasingly rosy thanks to shrinkage in supply.

http://www.ft.com/cms/s/2/e5a7cfb6-d87d-11df-8e05-00144feabdc0.html

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BIS taking in more gold - who are the counterparties this time?

Author: Rhona O'Connell
Posted:  Wednesday , 13 Oct 2010 

The latest figures from the IMF show that the Bank for International Settlements' declared gold holdings are on the increase again.  The BIS hit the headlines earlier this year when analyst Matthew Turner spotted figures in the BIS' Annual Report that showed the Bank's holdings of gold had soared as the Bank had carried out swaps with what turned out to be commercial counterparties (the initial interpretation was that it had come from other central banks).  By the end of April, the BIS' net gold holdings stood at 468 tonnes, having been just 119 tonnes as recently as the end of November.
The BIS' gold holdings were more or less unchanged over the next three months, but they have been increasing again since June, rising from approximately 467t to 512t over the months to end-August, an increase of 45t.
As shown in the chart below, the nominal value of the gold at the end of August stood at almost $21 Bn, more than five times as much as at the end of October 2009, reflecting a four-fold increase in the tonnage held, allied to a 20% increase in the gold price.


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