Thursday, January 26, 2012

GOLD FREE FROM CURRENCY

Gold the safe heaven investment avenue and the much debated topic of investment in 2011 still continues its journey in 2012.The objective of this article is to find the probable reasons which will support the Gold price and its sources of demand. Top 3 listed global gold mining companies and its prospective outlook for investments in 2012 has also being provided.

PORTFOLIO REBALACING:
Portfolio rebalancing is being aggressively introduced keeping the global economic turmoil and currency fluctuations. The importance of portfolio rebalancing by index, commodity, and hedge funds has now being introducing a new element of gold in their portfolio. Investors needs less volatile return,persistent growth over a long period and less prune to random currency fluctuation.Chinese investor is buying gold and has no intention to go for a selloff in the medium term. We all know that China has been doing extensively invetsments into gold.China has shifted from currency savings to gold savings resulting increased demand of gold. Currency fluctuation and inflation bubbles has increased the demand of gold and in 2012 its being well expected that demand will remain on the higher side as Euro instability makes investors to shift form currency to Gold savings.


This is one the reason why not only People Bank of China but all the major central banks of the world are doing investments into Gold. A lot of nations are running deficits which are not sustainable in the long run. Doing investments in cross border assets has increased the threat of collateral damages resulting less option for doing investments. Here comes a point where people just don't believe in paper currencies and prefer to invest in gold. The ongoing turmoil of Euro and its rising debt payment schedule which will begin by April to June 2012 will increase the demand of gold as a safe investment avenue.

MONETARY POLICY TO SPOOK PRICES.
Low inflation and slow growth of economy is going to inject liquidity into world economy which will further spook up the demand and the price of gold in 2012.India, China, US and Euro liquidity injection policy actions will increase the demand of gold buying.


The answer is simple gold will rule the world economy despite of its higher prices as all other investments avenues are on the peril of currency fluctuations. Currency fluctuation has being so much volatile that its quite difficult to hold an assets for a long term. Gold is an asset which is free from the currency fluctuations affects in a long term basis. In an recent note its was found that the weaknesses of the rupee against the U.S. dollar has also negatively affected India's demand of gold. The below chart illustrates the affect of gold due to currency fluctuation across the major economies.

The price of gold in India appreciated by 31% since June which is more than three times the price appreciation denominated Japanese yen. In fact China has already taken over India as the world's largest consumer of gold jewellery in the third quarter of 2011. Chinese value of sales of gold in 2011 rose 61% from the previous yea totaling the Rmb of 11.6bn ($1.8bn). One of the unique thing to be observed that all the Quantitative Easing policies failed to keep the world economy and its equity market to fetch the consistent return as compared to Gold investments.
 
 
Well the above context was based upon to find the demand and the price increase one can expect in gold but what about the story of gold manufacturing. Global gold mine production increased by 3.2 percent for the year 2011 to approximately 720 tonnes,production contributed to the majority of the output growth, although Mexico and Argentina also exhibited positive production on an annualized basis. Whereas there was an decline in production from Indonesia, Russia and Peru.

GLOBAL GOLD 3  PICKS
Now a quick look at the investment perspective at the best top 4 gold production companies.

Barrick Gold Corp. (TSE: ABX), miner, operates 26 gold mines, in addition to projects in the pipeline across Australia, North America, South America and Africa. According to a report issued by the company last year, it established 139.8 million ounces of proven, probable gold reserves.

Newmont Mining Corporation (TSE:NMC) (NYSE:NEM)  has operations around the globe, within eight countries in five continents including North America, South America, Australia, Asia and Africa. It has significant asset hold in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Till 2011 it had proven and probable gold reserves of 91.8 million equity ounces and an aggregate land position of roughly 39,000 square miles. It has received private placement with Eurasian Minerals Inc. (CVE:

AngloGold Ashanti (NYSE:AU) is a South Africa based top producing gold mining company with a total of 21 operations across four continents and ten countries including the U.S., Tanzania, South Africa, Namibia, Mali, Guinea, Ghana, Brazil, Australia and Argentina the company is doing heavy investments into exploration activity and promises to be one of the leaders of the industry globally.

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