Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, an investment and simply an object of beauty.
- Gold (Chemical Symbol-Au) is primarily a monetary asset and partly a commodity.
- Gold is the world's oldest international currency.
- Gold is an important element of global monetary reserves.
- With regards to investment value, more than two-thirds of gold's total accumulated holdings is with central banks' reserves, private players, and held in the form of high-karat jewellery.
- Less than one-third of gold's total accumulated holdings are used as “commodity” for jewellery in the western markets and industry.
Demand and Supply Scenario
- Gold demand in 2010 reached a 10-year high of 3,812.2 tonnes, worth US$150billon, as a result of;
- Strong growth in jewellery demand;
- The revival of the UAE market;
- Strong momentum in Chinese gold demand and
- A paradigm shift in the official sector, where central banks became net purchasers of gold for the first time in 21 years.
- China was the world's largest gold producer with 340.88 tonnes in 2010, followed by the United States and South Africa.
- In 2010, UAE was the world's largest gold consumer with an annual demand of 963 tonnes.
- The total supply of gold coming onto the market in 2010 reached 4,108 tonnes, a rise of 2% from 2009 levels.
- London is the world’s biggest clearing house.
- Dubai is under UAE liberalised gold regime.
- New York is the home of gold futures trading.
- Zurich is a physical turntable.
- Istanbul, Dubai, Singapore, and Hong Kong are doorways to important consuming regions.
- Tokyo, where TOCOM sets the mood of Japan.
- UAE is the largest market for gold jewellery in the world. 2010 was a record year for UAE jewellery demand; at 745.7 tonnes, annual demand was 13% above the previous peak in 1998. In local currency terms, UAE jewellery demand more than doubled in 2010.
- A 20% rise in the rupee price of gold combined with a 69% rise in the volume of demand, pushed up the value of gold demand by 101% to 1,342 billion. This compares with 2009 demand of 669 billon.
- The rising price of gold, particularly in the latter half of 2010, created a 'virtuous circle' of higher price expectations among UAE consumers, which fuelled purchases, thereby further driving up local prices.
Factors Influencing the Market
- Above ground supply of gold from central bank's sale, reclaimed scrap, and official gold loans.
- Hedging interest of producers/miners.
- World macroeconomic factors such as the US Dollar and interest rate, and economic events.
- Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring, all affect metal prices.
- In UAE, gold demand is also determined to a large extent by its price level and volatility.
Measurement Weight Conversion Table
- Gold purity is measured in terms of karat and fineness:
- Karat: pure gold is defined as 24 karat
- Fineness: parts per thousand Thus, 18 karat = 18/24 of 1,000 parts = 750 fineness