The Conversation (0)
The 2011 International Precious Metals and Commodities Show in Munich has grown significantly since its inception in 2005. This year, economic concerns over the Eurozone debt crisis pushed investors to buy physical gold and silver.
By Karan Kumar – Resource Investing News
The show, which started in 2005 with a few people, similar to a “family meeting”, has transformed into a global event with around 7,000 to 8,000 visitors and hundreds of presenters and sponsors this year, IT consultant Richard Michaelis from Rosenheim, Germany, told newspaper Sueddeutsche Zeitung in an article published this month. Michaelis has invested a large proportion of his savings into gold and other metals.
Every minute, a German buys, on average, about 13,000 euros worth of gold, the Sueddeutsche Zeitung reported, adding that at the fair this year, people were comparing prices of physical gold and silver and converting their euros to buy the precious metals. A trader told the newspaper that business was going well. “People are very insecure. They do not trust the euro anymore.”
Gold prices fell on November 24 on worries over global economic growth and the ongoing Eurozone debt crisis. Spot gold fell 0.6 percent to $1,690.20 an ounce. In September, gold climbed to an all-time high worries about the health of the world economy.
Ronald Stoeferle, a gold analyst at Erste Group, who attended the conference, said in an interview that investors are moving into physical gold as macroeconomic concerns remain. He said the conference was really big this year, adding that “it was really interesting to see how the questions and the interesting topics of the visitors attending have changed.” Normally, at the end of Stoeferle’s presentation, he is asked about his long-term price target for gold, whether he thinks gold is in a bubble. However, this year people asked him “more and more about the gold confiscation. They’re asking about what the chances are for riots on the street and major wars to happen. So I think there’s a pretty big shift in peoples’ attitudes and their fears, so the monetary aspect of gold is getting more and more important and people don’t want to make big money, they just want to preserve their purchasing power and their wealth – that was the really interesting point, I think.”
Also at the conference, investors asked mining companies why their shares have not risen at the same pace as the climbing price of gold. Rolf Morrien reported for finance portal GeVestor that shares of miners have lost because when macroeconomic conditions are weak, the shares of gold miners lose more value than the price of gold. He added another reason why shares of miners have not risen at the same pace as the price of gold is because of the rising costs of exploration, energy and raw materials, labor and more stringent environmental regulations.
Morrien said he expects the price of gold to rise to $2,000 an ounce, pointing out that mining shares hold big potential.
Erste’s Stoeferle said “in this kind of environment of negative real interest rates more or less all over the world – (gold is) just the perfect place to hide. My target, until I release my next report – is $2,000 but at the end of this bull market, I expect at least $2,300, which is the inflation adjusted … but honestly I still imagine much higher target prices.” Stoeferle cautions investors to be careful what they wish for, adding that he does not want gold to trading at $10,000 an ounce.
“Because it would mean that our whole system would be basically in chaos and that’s really what nobody wants to see. But I think it’s possible. As I said, in this environment of negative real interest rates all over the world you have risk of financial Armageddon, loss of trust in fiat currencies. I think you just want to hold a big chunk of your portfolio in physical gold or physical silver.”
