Gold

Gold is Gold
Analysts believe that Gold should be a part of the portfolio. In 1849, gold was discovered in California. During financial crisis, countries have turned to gold for help. In 1937, when agricultural production slumped, India sold 1,400 tonnes of gold. In 1991, the Indian government shipped out 45 tonnes of gold to temporarily bail out the country of a severe money crunch. In 1979, at the height of oil crisis, the US dollar was devalued, buyers lost confidence in the currency and bought gold instead.

3 major areas of gold: Jewellery, Industry and Investing.
Jewellery accounts for 60% of the demand for gold. India is the largest consumer of gold and accounts for one-fifth of the global gold trade. 30% of the demand comes from investors who trade in gold exchange traded funds and from countries that hold gold as an alternative currency.

Reasons for the demand of gold
Investors are shifting from equities to gold. The US economy has been spinning into a recession because of a huge bumper consumer spending. The recent subprime crisis accelerated the shift.
With the dollar losing its grip, Asian countries have begun substituting dollars with gold in their investment portfolio.
China, which did not allow people to own gold, has deregulated. In 2002, Shanghai Gold Exchange was formed; opening up the demand floodgates so much that by 2007 China has overtook US to become the second largest consumer of gold.

Gold will be Gold

Of every 100 tonnes of gold, 70 tonnes comes from gold mines, of which 35 tonnes comes from 8 countries alone. Prodcutiong of gold is stagnating in few countries due to exhaustion of inexpensive mine-able gold resources and strict environmental laws.25% of gold comes from sale of gold reserves from the country. A treaty signed in 1999 for sale of 400 tonnes of gold annually by participating banks expires next year and don’t show any sign of renewal. Thus, going forward, gold prices are likely to stay firm.