Australia, Commodities, Economics, Personal Finance - Saturday, August 30, 2008 22:02 - 0 Comments

The case for gold

Australian Financial Review, August 2008

Even by the choppy standards of world stock markets, the gold price has had a roller-coaster time of it lately. In March gold hit a landmark high of US$1,000 an ounce, with many commentators calling for it to climb as much as 50% more. But at the time of writing it was at $786, having fallen more than 20% (the dictionary definition of a bear market), most of it in the space of a single week at the start of August.

So what’s happening? After all, the base case for gold is very strong indeed. Aaron Smith, managing director of the managed futures fund provider Superfund Financial in Singapore, puts it like this: all of the gold existing in the world today is equivalent to a cube approximately 15 metres long, wide and deep. It’s valued at US$4.5 trillion; the US national debt alone is almost 15 times that amount. There’s really not all that much of it. And there isn’t a great deal more being found – people are digging iron ore mines, nickel mines and copper mines, but there’s no boom in new viable gold mine discoveries. Supply is therefore limited. Continue…

Popularity: 1% [?]