/ 16 March 2006

The shimmer of gold

Fuelled by strong investor demand, the assets of Absa’s NewGold Gold Bullion Debentures have shown remarkable growth of 216% in the period December 2005 to January 2006.

Absa’s NewGold allows investors to invest directly in actual gold rather than gold companies. This means that investors’ returns are directly linked to the gold price.

The strong investment demand continued in January where the assets of NewGold grew by a further 22%.

“This sustained investment inflow into NewGold indicates to us that investors continue to believe in the fundamentals underpinning strength of the gold price as well as in the more general benefits of including gold in their portfolios,” says Dr Vladimir Nedeljkovic, of Absa Corporate and Merchant Bank’s Capital and Debt Markets.

The fundamentals for gold have been turning positive over the past year, leading to the current situation where both individuals and institutions are raising their holdings in the physical metal, gold stocks as well as exchange traded funds.

Key drivers of gold are dollar weakness, static mine production, rising inflation outlook, rising physical demand, rising investment demand and producer dehedging. All these factors are playing a role in pushing gold to record levels.

“Gold lagged the other metals during the China-inspired commodity boom during 2002 to 2005, but investors are now turning their attention to this precious metal, which has been the store of value for centuries.

“We envisaged a very exciting period in terms of future demand when Absa listed NewGold in November 2004, but the recent performance has surpassed even our expectations,” says Nedeljkovic.

South Africa became the third country in the world to offer institutional and retail investors the opportunity to invest directly in gold bullion with the listing of Absa’s NewGold Gold Bullion Debentures in association with the World Gold Council just more than a year ago.