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Gold investment demand to remain strong this year

LONDON (AFP) – Western investment demand for gold will remain “well underpinned” this year, regardless of the health of the economy, the World Gold Council said in a report published on Wednesday.  The upbeat forecast came despite news that gold demand sank by 11 percent last year in tonnage terms, owing to weaker industrial and jewellery demand, according to the WGC.

“Regardless of whether the economic recovery gathers momentum or stumbles in 2010, we believe that western investment demand will remain well underpinned,” the WGC said.  If the global economy falters, then western investors will continue to look towards gold for its diversification and portfolio-insurance properties.

“Conversely, if the economic recovery becomes more firmly entrenched, then inflation concerns are likely to continue to gain prominence.”

Investors tend to flock to gold in times of economic uncertainty owing to its status as a safe-haven investment. The precious metal is also regarded as a safe store of value in times of higher inflation.  The London-based WGC cautioned on Wednesday that the outlook for non-western demand was dependent on the level of gold prices.  Gold had smashed a series of records last year on the back of the weak dollar, inflationary fears and moves by central banks to diversify away from the greenback.

The glamorous precious metal had hit a record pinnacle of 1,226.56 dollars an ounce on December 3, 2009, but has since dropped, trading close to 1,115 dollars this week.  Industrial and jewellery demand for gold was forecast to increase gradually in areas where economic conditions were improving, according to the WGC.  “Western jewellery markets are likely to be constrained by high levels of unemployment, while in non-western markets, the limiting factor is budget constraints as incomes have not kept up with the rise in the gold price.

“Nevertheless, any significant dips in the gold price are expected to be well supported,” it said.  The WGC added Wednesday that the volume of total identifiable gold demand fell 11 percent in 2009 from the previous year to stand at 3,385.8 tonnes.

Indonesia group prefers gold as dollar loses shine

JAKARTA (AFP) – Guided by a Scottish-born convert to Islam, a group of devout Indonesian Muslims is shunning “worthless” paper money in favour of gold and silver coins for their daily transactions.  The followers of Sheikh Abdalqadir as-Sufi — born Ian Dallas — trade goods like food, medicine, clothes and phone cards with gold dinars and silver dirhams in line with a strict interpretation of Islamic law.  Their anti-modern views sit uneasily with the naked capitalism of Indonesia’s teeming capital, the financial and political centre of one of the fastest growing economies in the world.

“History has proven that, since the prophet Mohammed, the value of one gold dinar for thousands of years has always been equal to the value of one goat,” said 33-year-old Kurniawati, who runs a shop in southern Jakarta.

And they want the government — or preferably a worldwide Islamic caliphate — to replace paper currencies with the dinar that was used, in the words of the sheikh, “until the incursions of the kafir financiers in the Muslim lands”.  Wakala Induk Nusantara (WIN) is the body responsible for regulating the issuance and distribution of the dinar in the world’s most populous Muslim-majority country.  Coins minted in Indonesia are also in circulation in Australia, Malaysia and Singapore, WIN official Riki Rokhman Azis said.

The number of dinars on the local market more than doubled in 2009 to 25,000 pieces, reflecting the movement’s growing popularity, he said.

“We decided to mint silver and gold coins in Indonesia following a fatwa issued by Sheikh Abdalqadir as-Sufi in Cape Town of South Africa, banning Muslims from using paper money,” Azis told AFP.  Recent global economic upheavals, with their origins in the US mortgage and derivatives markets, have confirmed in the eyes of the sheikh that the final victory of Islamic finance is at hand



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