Gold sees price surge amid global uncertainty, becomes “safe asset”
Over the past two to three years, the price of gold on the international market has steadily risen, driving up prices in Cambodia, even as the country exports refined gold to global markets.
According to a post on the social media page of Hang Chheng Meas 24-hour Gold-Forfx, on the morning of October 22, gold was reported at $2,732 per troy ounce (equivalent to 8.3 chi or 31.1 grams) and $3,291 per damlung (10 chi or 37.5 grams). A chi is a traditional Southeast Asian unit of measurement for precious metals, equal to 3.75 grams.
Another social media page, "Tracking Hang Chheng Meas Gold", reported that as of October 22, international Hang Chheng Meas gold prices were $87,604 per kilogramme, $3,285 per damlung and $2,727 per ounce.
Based on research conducted by the author, as of October 22, 2023, gold in Cambodia was selling at $2,390 per damlung. Compared to this year, the price of gold has increased by about $890 per damlung, or approximately 37.2%.
Most of the gold used in Cambodia is imported from Hong Kong.
Gold: "Safe asset" amid global political and economic instability
Economist and professor at the Royal School of Administration, Duch Darin, told The Post on October 22 that the significant rise in gold prices over the past year is due to multiple crises, including uncertainty in global economic growth, inflationary pressures, the weakening of the US dollar, geopolitical tensions between major powers and the ongoing conflicts in Ukraine and the Middle East.
He explained, "The uncertainty surrounding the global economy and fears of a potential recession have led investors worldwide to seek safe assets like gold, increasing its demand and driving up prices."
Darin, a former professor in the US, highlighted inflation and monetary policies as key factors. The recent surge in inflation in the US and Europe has prompted central banks to maintain high interest rates. However, since inflationary pressures persist, gold continues to be an attractive asset as a hedge against inflation. Moreover, the weakening US dollar has encouraged investors to turn to gold as a secure store of value.
He added, "Instability in regions like Eastern Europe and the Middle East has further driven investors toward safe assets such as gold. Conflicts and disruptions in energy supply chains have heightened global economic risks, prompting a shift towards gold. These factors have collectively contributed to the continuous rise in gold prices."
Rise in prices presents opportunity for certain investors
Darin noted that high gold prices can benefit investors who purchased gold when prices were lower. Additionally, companies in Cambodia involved in gold mining and export stand to gain from increased revenues due to the rise in prices.
He explained, "High gold prices can offer stability for investors during times of global economic uncertainty. Major gold-producing countries, such as Australia and some African nations, can also see improved revenues when gold prices rise, leading to a better trade balance and enhanced tax stability."
The economic expert added that high gold prices could negatively affect countries heavily reliant on gold imports, as it would raise the cost of acquiring gold for jewelry production and various technologies.
In markets where gold jewelry plays an important cultural role, such as India and China, high prices may deter consumer spending, impacting sectors like retail and gold-related manufacturing.
Darin mentioned that gold prices are likely to remain stable or continue rising until early 2025 if global economic uncertainties persist, especially concerns surrounding inflation and a potential global economic crisis.
He explained, "If geopolitical risks, such as the wars in Eastern Europe and the Middle East, persist or new tensions emerge, it will likely drive up the demand for gold, further increasing its price."
Major powers influence gold prices
Lor Vichet, vice-president of the Cambodia Chinese Commerce Association (CCCA), also told The Post that historically, gold has been a valuable asset that tends to rise in price during periods of political instability, war or turmoil.
He noted that recent crises, particularly geopolitical conflicts like the Russia-Ukraine war and the conflict in the Middle East, have posed significant challenges to both global politics and the economy.
He added that gold prices will fluctuate depending on the foreign and monetary policies of major global powers.
"Since gold prices respond to global political and security conditions, we will need to wait for the outcome of the upcoming US election in November to see which party's candidate wins and what their policies will be toward issues such as North Korea, the Ukraine war and the conflict in Israel," he remarked.
Cambodia’s first gold refinery
Cambodia's first gold refinery officially began operations in June 2021. The project, an investment by Renaissance Minerals (Cambodia) Ltd, an Australia-based company, is located in the Okvau area of Mondulkiri province’s Keo Seima district. The construction of key infrastructure for the gold mining and refinery site started in mid-2020, with a total investment of approximately $120 million.
Renaissance announced its capability to extract around two million tonnes of raw ore annually, refining it into 90% pure gold and generating an estimated $185 million per year. Out of that, national revenue from taxes and royalties is expected to reach about $40 million.
In November 2023, Minister of Mines and Energy Keo Rottanak stated that nine licensed gold mining companies are operating in Cambodia, with Renaissance Minerals being the top performer. The ministry also reported that, by the end of 2023, the country had extracted approximately 9.5 tonnes of gold.
Source: https://www.phnompenhpost.com/