2011-12-06

George Soros - evidently feels the gold has yet to reach bubble territory

The gold price retreated Monday, sliding $8.65 to $1,733.95 per ounce. Gold prices sank while stocks and commodities posted strong gains. S&P 500 stock futures climbed 17.00 to 1,260.50 while crude oil, copper, and soybeans all moved to the upside. Optimism that Italian Prime Minister Mario Monti’s proposed budget cuts will help stabilize the nation’s bond market helped power the broad-based rally. The yield on 10-year Italian sovereign debt fell to 6.1%.

George Soros, who famously called gold “the ultimate bubble” several years ago, evidently feels the gold has yet to reach bubble territory.

The legendary investor – famous for founding the Quantum Fund in the 1970s and for shorting the British pound in the early 1990s – invested $40 million in the $2.8 billion IPO of Chow Tai Fook Jewellery Group Ltd, according to a report from Forbes.

Chow Tai Fook Jewellery Group Ltd is expected to list on the Hong Kong Stock Exchange on December 15, where it plans to sell 1.05 billion common equity shares, or 10.5% of the Company. Chow Tai Fook generated revenue of $4.5 billion in the 12 months ending March 31, 2011, according to the report – considerably more than Tiffany’s $3.09 billion over the same time frame.

The report noted that “Beyond showing he still believes in the yellow metal, Soros’ investment in Chow Tai Fook highlights the strength of Chinese gold demand. China is not only the world’s top gold producer, with yearly output of 340.9 tons in 2010, but one of the largest importers, with investors bringing in 60.2 tons in the third quarter of 2010 alone, according to the World Gold Council.”

“Official purchases by China’s central bank have continued through the years, but China’s holdings remain proportionally small,” Forbes added. ”China’s reserves total 1,054.1 tons according to the World Gold Council; the U.S., which counts with the world’s largest gold reserves, holds about 8,133.5 tons. Even more interestingly, China’s gold reserves represent only 1.6% of its total foreign exchange reserves, compared with the world average of 11% and the U.S.’s 74%. China will surely be a buyer of gold in years to come.”

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