Financial Survival Tips.-Panicked Investors Send Gold Demand up 56%

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Panicked investors send gold demand up 56% by Catherine Boyle as published on the Times On Line on 11-20-2008

Demand for gold smashed the previous record in the three months between July and September as fearful investors switched funds from the stock market and savings into ingots and coins, often storing them at home as their trust in banks fell.

New figures from the World Gold Council (WGC) show that investment demand for gold rose 56 per cent to 382.1 tonnes for the third quarter as investors sought safe havens away from the stock market turbulence.

Dollar demand for gold reached a record of $32 billion (£21 billion) in the third quarter – 45 per cent higher than the previous record, set in the second quarter of this year, according to the data compiled by GFMS, the researcher, for the council.

Philip Olden, managing director of the WGC, said: “A lot of this is being driven by retail investors in Europe, who have been scared off the stock market. They are either taking their gold bars and coins home or putting them in safety deposit boxes at the bank.” European investors bought a record 51 tonnes of gold bars and coins as European banks reported huge write-downs and France became a net investor in gold for the first time since the early 1980s. There has been a shortage of gold coins as the fabricants who make them did not anticipate the high demand, according to Adrian Ash, head of research at Bullion Vault.

The United States, India, Switzer-land and Germany reported the biggest rises in gold investment as Lehman Brothers collapsed and the US Government announced it would have to bail out the banking system.

Gold is easy to invest in for individuals who might find a broker too pricey, as they can buy gold coins and bars through online dealers. Turnover at Bullion Vault, which allows retail investors to buy 400oz ingots, rose five fold in the year to October 31.

The price of gold spiked at $910 per ounce in early October and has since fallen to about $740 per ounce, as cash-strapped hedge funds have been forced to sell assets. The WGC said: “Gold is one of the few assets remaining that could be sold at a reasonable price to meet margin calls on other, worse-performing assets.”

Peter Spina, an analyst for Gold-Seek.com, said: “Funds that would like to keep their asset of last resort are being forced to sell. This is causing weakness in the paper gold market price, but it is not a true reflection of the physical market.

“There will be more victims of the fund collapse and more forced liquidations even if it requires selling your most desired assets such as precious metals. Once this process works itself through, the true market prices for gold will readjust.”

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