WGC Showcases Gold's Emergence as Strategically Important Asset

SEATTLE (Scrap Monster): The recent report published by the World Gold Council (WGC) analyzes the structural changes to global gold market since the global financial crisis in 2008. The impacts of the crisis resulted in sustained shift in demand for gold. Also, gold has emerged as a more mainstream asset.

According to WGC, post collapse of Lehman Brothers in September 2008, gold moved to significantly higher levels in the one-year period ended July 2009. In fact, gold had fallen sharply in Q4 2008, but staged a strong recovery afterwards. The prices surpassed pre-crisis levels by March 2009 and thereon went to make strong gains. The upward momentum continued in 2010 and 2011 as well. The sharp jump in gold prices was not only attributed to weakening of the U.S. dollar, WGC noted.

Gold industry too witnessed considerable changes. The investment demand peaked. The bar and coin demand reported significant surge in the U.S. and Europe. Central banks bucked the trend of selling gold assets and initiated gold purchases, though in small quantities. It must be noted that central bank gold buying has accelerated during recent years. This clearly shows that gold is re-emerging as a strategically important asset.

There has been a major shift in gold demand from West to East. Emerging markets have turned out to become major consumers of gold. Incidentally, China and India together account for almost 50% of the global gold demand. The gold’s behavior throughout the financial crisis demonstrates its underlying strength as an asset to hold on to during difficult times, WGC report said.