Bullion Booms as Gold Industry Gets a Timely Makeover

By Padgham, Jane | The Evening Standard (London, England), December 10, 2002 | Go to article overview

Bullion Booms as Gold Industry Gets a Timely Makeover


Padgham, Jane, The Evening Standard (London, England)


Byline: JANE PADGHAM

JUST in time for Christmas, gold has regained some of its former sparkle.

Boosted by a host of factors, the precious metal has surged almost 20% in price over the past year and, at $325 (pound sterling206) an ounce, is only a few dollars away from a five-year high.

The turnaround in its fortunes has been dramatic. In the spring of last year, gold was at a 22-year low of $254 until investors were reminded of its appeal as the ultimate safe-haven asset at a time of great uncertainty.

Although this explains some of its meteoric rise, the long-overdue shakeup of the gold production industry has also played a part.

Ross Norman, an analyst at precious metals news service TheBullion-Desk.com, says: "Last year, the gold price, were it a cardiogram, would have suggested the patient was in intensive care. Gold has made slow but steady gains and is all the stronger for it, and a continued rise is expected."

Britain's only gold fund, Merrill Lynch Gold & General, has outperformed every other UK unit trust over the past year. Investing in gold mining shares, it has risen 60% in 12 months and 105% over the past three years.

So why have so many gold bears suddenly become bulls? The most obvious reason is the myriad external factors, including sluggish global economic recovery, stock market weakness, a slide in the dollar, mounting political tension in a number of trouble spots, including the threat of war with Iraq, and concern over corporate governance at US firms such as Enron.

Brenton Saunders, a precious metals analyst at Deutsche Bank in Johannesburg, says: "I think it's a projection of the risk aversion and general lack of direction of global equity markets. …

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