The Gold Market

The gold market

The Pharaohs in Ancient Egypt were one of the first mining communities in the world. Since the beginning of recorded history people have sought gold, and Egypt's gold production at the time made the country very wealthy.

Today, the price of gold is seen as a barometer for the world's economy. Total gold demand has tripled since 2001 to almost $120 billion in 2009, despite the increase in the price of gold during that time.

The Key Driver

The most important component of Centamin's earnings is the market price of gold. We believe that its value as jewellery and as an investment vehicle will continue to increase.

In 2011, prices ranged from US$1313.93 to US$1900.23 per ounce – a record high.

A Continuing Upward Trend

We believe this upward trend will continue for the following reasons:

  • A safe haven - global markets are likely to continue to be volatile and gold is seen as a safe haven

  • A hedge against inflation - large fiscal deficits and the worldwide easing of monetary policy could lead to inflation. This situation would increase the demand for gold as it is viewed as a hedge against inflation

  • A weakening US dollar - historically gold tends to be inversely correlated to the US dollar, which has seen depreciation in value due to the global financial crisis in recent years. Buying gold therefore provides portfolio diversification for investors

  • The supply of gold is declining - 2001 is seen as the peak of global production and since then a general downward trend has been experienced

  • Increased buying by the BRIC countries - The BRICs (Brazil, Russia, India and China) hold significantly lower gold reserves than the more developed countries, instead holding the US dollar. As they identify a need to reduce their exposure to the dollar and move to a safe haven, we believe they will turn to investing in gold

For further information on gold, please visit the following websites: