Gold leads "January effects" in 2009
Gold price pushed above US$900/oz in Jan (up 5% YTD) and continued to outperform most commodities / asset classes. Despite the US$ strength in Jan (up 8% against the Euro), gold price has been dominated by continued
investment demand buying. This was evident by 8% mom increase in major gold’s ETFs, the second highest mom gain since Sept 08 when Lehman Brothers filed for bankruptcy. We believe Jan was characterized by further global
quantitative easing, extreme FX volatility (GBP in particular), deteriorating macro environment, which have all been positive catalysts for gold given its countercyclical nature. We reiterate the following key themes for gold in 2009: 1) Potential renewed US$ weakness; 2) Low real interest rate environment; 3) Continued investment demand buying; 4) Long-term inflationary expectation from global quantitative easing; and 5) Potential of China’s central bank buying into gold.