Saudi gold demand up 30%
Mon Aug 20, 2007 15:17

Saudi gold demand up 30%
Saudi Arabia: Monday, August 20 - 2007 at 14:43
Demand for gold in Saudi Arabia rose 30% in Q2 with Umrah
pilgrims and tourists helping to drive up sales, according to
Arab News citing a World Gold Council report. Total demand
in the kingdom amounted to 42.5 tonnes with the decision back
in March to slice the duty liable on imported jewellery from
12% to 5% also playing a major part in boosting sales.

LONDON (Thomson Financial) - Gold traded in a tight range close to 660 usd today,

Federal Reserve Could Start A Gold Rush
Andrew Farrell, 08.20.07, 4:45 PM ET

The Federal Reserve is mulling a federal funds interest rate cut; a move that would buff the luster of gold miners.

Lower interest rates weaken the dollar and cause inflation, which both drive investors goldward. RBC analyst Stephen Walker says that gold equities have charted significant gains during 58.3% of rate cutting cycles by the Federal Reserve. They have only underperformed the U.S. equity markets in 25.0% of the cycles.

The Federal Reserve raised hopes last week of a lowered federal funds rate after slashing a secondary rate. On Friday, the Fed cut its discount rate by 50 basis points, to 5.75%, from 6.25%. Banks use the so-called discount window to borrow money directly from the Fed. (See: "The Fed Finds An Answer")

The slashed discount rate puts the federal funds rate next in line for a mowing. December fed funds futures trading on the Chicago Board of Trade rose Monday to 95.5, indicating futures traders are expecting rates to be cut to 4.50% from 5.25% by the end of this year.

At gold's current price, and with hope of a rate cut soon adding a boost, gold producers look attractively priced. Walker says that gold equities are currently trading at valuations as if gold were $605 to $615 per ounce. An ounce of gold trading on the New York Mercantile Exchange on Monday traded for $658.70 an ounce.

According to Revere Data, some of the gold miners trading most cheaply on a price/earnings ratio basis are Northgate Minerals, which has a trailing twelve month ratio of 6.0; Rio Narcea Gold Mines, which has a ratio of 7.8; and Compania de Minas Buenaventura, which has a ratio of 12.6.

Gold miners traded mostly higher on Monday with help from rising gold prices. Shares of Eldorado Gold rose 37 cents, or 8.4%, to $4.78 and shares of IAMGOLD climbed 2.3%, or 16 cents, to $7.11.

A fed funds rate cut would spur broad U.S. economic growth but benefit some companies more than others. Lower rates would be a windfall for mortgage investor Annaly Capital Management which earns money on the spread between its portfolio and cost of borrowing.

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