India Gold - Customer Zone - Reuters

COMMODITIES GOLD GOLD: REBOUNDS WILL RISK SHIVER BATTERED AVERSION ON JAPAN AFTER BY BANISH DEBT SHARPEST U.S. CREDIT DOWNGRADE CORRECTION LOSS DOWNGRADE SINCE DESPITE FEARS? MAY CORRECTION FEARS AUGUST 2011
The World Gold Council estimates there was a roughly 25 percent rise in demand for gold from Chinese consumers between
the second quarters of 2010 and 2011,
Gold is also not particularly subject to what BNP Paribas' De Vijlder calls the "feedback loop", which occurs when a significant
price rise begins to affect economies and prompts policy changes by governments.
The same cannot be said for the Swiss franc, which has also wobbled recently courtesy of the SNB's moves to cap its gains.
The SNB has cut official rates to near zero and pumped out more money to lower the franc's value. It has also sold francs in
the forwards market to drive rates lower and make it expensive to hold the currency.
This is only a part of what it could do, meaning investors will have to battle to protect gains -- something that detracts
strongly from the concept of a "safe haven". Charlie Morris, head of absolute returns at HSBC Global Asset Management, believes
investors have been treating the Swiss franc as something that it is not.
"It is easy to forget that the Swissie is a relatively minor currency and not the global liquidity pool that it is cracked up to be,"
he said.
'POINTLESS AND DANGEROUS'?
U.S. Treasuries, meanwhile, are at the point where investing in them is only slightly more lucrative than putting money under
the mattress.
They are supported, like gold, by outside-the-market factors such as Federal Reserve buying and huge inflows from China.
Some of that will change as the U.S. economy improves or as Beijing diversifies.
Mainly, though, yields of around 0.2 percent for short paper and only 2 percent for long, offer little. It would not take much of
an inflationary spike or economic rebound to prompt a rush to the exit.
"Treasuries are either pointless at the short end or dangerous at the long end," Morris said. "Either we have deflation and
bonds deliver paltry yields ... or, more likely, inflation resurges and investors in bonds lose their shirts."
A man melts down gold jewellery in Los Angeles, California August 23, 2011. REUTERS/Lucy Nicholson
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