Uncertainty suggests caution, prudence, and gold. You need a shelter, when it rains or pours.
To purchase currencies is risky, since any of them is on the verge of a devaluation, mainly the US dollar after the last quantitative easing. The Rmb is the exception, but it is neither fully negotiable nor convertible. Saving and investment are thus looking for alternative solutions. Individuals might buy art and diamonds, investors bet on gold.
It is a reality more than a dream. According to the World Gold Council, global demand is on the rise, both for industrial and personal use. India and China are the driving forces and retain the highest positions in the global ranking. The first increased its purchases by 28% yoy in the third quarter, reaching 30% of the world’s consumption. The latter had a lesser growth (14%), even if the investment’s share is much bigger than the personal one. Bets on gold have been rewarded: since the year 2000 its value moved from 250 to 1.400 Usd per ounce. Increases over the last 2 years were spectacular.
Robert Zoellick, World Bank president, shocked the markets by proposing gold as a new reference point for the global currency arena. To defeat a general scepticism, he then clarified he did not advocate the old gold standard system. In effect, gold is simultaneously an anchor for stability and a burden to heavy for taking off. Its supply grows at a mere 1.6% a year, a good reference to contain inflation. But the banking system needs more resources to finance the growth. The economy requires complexity, far-sightedness, and governance, more than restrictions.
Gold still will be sought as an economic haven, but it will not dominate the markets. The precious metal reflects the uncertainty, although it is unable to solve it.