28/01/2009 - 22:00

Gold buoyant in a sea of instability

28/01/2009 - 22:00

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AS the world's financial woes spread to affect most commodities and industries, gold's status as a traditional safe-haven investment has helped to boost the sector.

AS the world's financial woes spread to affect most commodities and industries, gold's status as a traditional safe-haven investment has helped to boost the sector.

The gold price hasn't suffered as much as the other commodities, such as base metals, in recent months. In fact, the declining value of the Australian dollar has strengthened the value of gold in local currency terms by more than 25 per cent over the past six months, to $A1,300 an ounce.

Hartleys analyst Andrew Muir said gold prices had held up well.

"This is obviously helping gold miners' margins, so while the margins of most of the commodity producers have been hit, in Aussie dollar terms, gold prices are doing pretty well," he said.

In US dollar terms, the picture is not quite as positive, with the gold price currently about $US900/oz.

This is well above its recent low of $US709/oz in November 2008, but below the record US dollar price achieved early last year, when it briefly snuck over $US1,000/oz.

Mr Muir said while some gold explorers might benefit from the current environment, it was the producers who were benefitting the most.

"There is definitely a shortage of physical gold, not just here but all over the world," he said.

"People would rather have it than shares or cash, there's definitely been a movement in that direction."

Mining companies Angolgold Ashanti and Independence Group last week illustrated the potential benefits of the stronger gold price. They upped the gold resource at their Tropicana joint venture to 5.01 million ounces, partly as a result of drilling success but also because the gold price used in their mine planning rose from $A985/oz to $A1,250/oz.

Gold Corporation chief executive Ed Harbuz said orders had risen to the point where The Perth Mint had a shortage of manufacturing capacity last November.

"There was a backlog and we've started taking orders again, but for a limited period of time we were working on an allocation basis, so everybody has to give us their expressions of interest and then we allocate it," Mr Harbuz told WA Business News.

"And we're not unique; every mint in the world that supplies investment gold coins is struggling to keep up with demand."

Mr Harbuz said the value of gold shot up sharply from the middle of last year.

"With gold the prime use is jewellery, and jewellery sales have gone right down, so you would expect the price of gold to be dropping" he said.

"But in times of uncertainty people tend to buy gold as a refuge or a safety net,

From a retail perspective, the trend is not necessarily good news, with jewellers report a decline in consumer spending.

Kara Jewellery principal Surandra Pattani said jewellery sales were down all over the country because of the price of gold and the economic situation.

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