BNP Paribas
Global Equity & Commodity
Derivatives - London

Executive Summary:
Gold reached an intra-quarter peak in Q1’09 of US$1,005/oz on 20 February.
At this price level, however, momentum seemed to slow and the gold
price retreated. It traded in a range of US$900/oz to US$960/oz until the end
of March, and has since closed below US$870/oz. Safe haven buying and
hence, investment demand, have been the main price drivers since September,
with strong inflows into vehicles like Exchange Traded Funds.
While investor demand kept prices at high levels, off take from other demand
sectors, particularly jewellery, were hit. On the supply side, anecdotal evidence
suggests that deliveries of gold scrap were buoyed by high prices.
Central bank sales, on the other hand, continued to be relatively low. The
volume of de-hedging by gold producers in Q4’08 reached its lowest point
since 2006.
In a Special Focus, we have examined one aspect of gold’s ‘heralded’ safe
haven properties by comparing its risk /return profile compared to that of US
Treasuries and the S&P 500 index (Chart 2).