Craze for Yellow Metal

1176 Words3 Pages

Craze for yellow metal

The yellow metal is considered one of the most valuable assets in the world and reckoned as best store of value against inflation, low interest rates, and any uncertainty. Interestingly, unlike other conventional investments, the metal neither pays dividends nor any interest to its buyers. Nonetheless, the price of gold is rising at such a torrid pace, investors usually not at loss when investing in gold business these days. Unlike old times when only queens and princess had access to the precious metal, gold is now being sold and bought in open markets in small and large quantities.

The yellow metals was priced at $20/ounce in 1883, $260 in 2001, $300 in 2003, $500 in December 2005 and $1208.75/ounce on July 9, 2010. Notwithstanding the constant rise in price, appetite of retail investors and consumers has yet to slowdown-instead, it moved up further. The significant increase in investment demand, in coins and bars, has offset downslide in the demand of gold jewelry, as investors seek refuge in gold. The share of Jewelry as end user of gold has declined from 80% to a little over 60% (yet its appetite in China and India the two largest consumers of gold is growing). Global investment demand, according to Mining Weekly estimates, jumped 885T in 2008 to 1820T at the end of 2009-a gain of 105% and a record high increase.

Gold jewelry demand runs high in South Asia, East Asia and the Middle East. Women in the Sub-Continent would use gold as adornments and or store of value. Smart housewives prefer their savings in gold jewelry instead of holding it in cash form and it is passed onto, in gifted form, to daughters and sons at the time of wedding.

In the Sub-Continent the wedding ceremony is incom...

... middle of paper ...

...a common practice in India and Pakistan and very popular among housewives. They would sell old fashioned jewelry or trade in exchange for new fashioned in order to run with current fashions. As most of them cannot afford buying a brand new jewelry set or ring, or necklace they are content to swap for their old fashioned gold jewelry with new ones and are also willing to pay extra for this swap.

The old fashioned jewelry is also sold in the market to raise cash for households who are in need of cash. As the price race of gold continues so is the sale of scrap which jumped to 1,674T last year up from 986 T in 2003. Finally, with easing off the financial crisis in the West and stable value of dollar, and as developed economies come out of recession cage, the price of yellow metal is likely retread to a new level. The gold prices will unlikely ease off, otherwise.

Open Document