Gold May Extend Record Gain on ‘Ocean’ of Central Bank Money, Phoenix Says

Gold may rally to a record as investors from China, Japan and the Middle East to buy the metal on expectations of "hyperinflation" created by central banks, according to Phoenix Gold Fund Ltd.
"The real driver for gold is the ocean of new money reserves created by irresponsible central banks around the world," said David Crichton-Watt, manager of Kuala Lumpur, located at the bottom of U.S. $ 140 million in a interview. "Hyperinflation is a very likely outcome, so that gold can go to any dollar amount."
Ingots may extend its advance as Japan 10th, beaten by an earthquake and tsunami on 11 March, joins global peers in the money supply increase, Crichton-Watt, said. The metal rose to a record $ 1444.95 an ounce on 07 March as the turbulence in the Middle East and the debt crisis of European demand, driven by investment haven.
European leaders meet this week to create a permanent solution to the debt crisis in the region. JPMorgan Chase & Co. said the government of Portugal could collapse today as the European Parliament votes on the budget cuts that have divided lawmakers. Japan pumped a record 40 trillion yen (four hundred ninety-four billion U.S. dollars) in the financial system since the tremor to soften the economic impact.
"Western governments and the government of Japan are essentially bankrupt and have no intention of reducing its deficit and debt," said Crichton-Watt, 63. "Once confidence goes, there will be a real panic."
Mohendra Moodley, a fund manager based in Sydney Funds Management Pty Taurus, shares Crichton-Watt view that money supply has been very high in an attempt to repair the economy, while surveys in the earthquake in the Middle East and Japan are cautious investors.
'No one is responsible'
"Investors should follow precautions, health positions in gold and maintain relatively liquid portfolio" Moodley wrote in a monthly report to clients yesterday. "Gold is the responsibility of anyone."
Phoenix Gold, managed under AIMS Asset Management Bhd and set in 2001, holds shares in companies mining gold, physical gold, as well as futures and options. It was profitable in 2010 of 58.2 percent, after a jump of 121.7 percent in 2009, according to data compiled by Bloomberg News. hedge funds in commodities, as measured by the Index of commodity trade Newedge on average 11 percent return last year after a similar growth in 2009.
Gold for immediate delivery traded little changed at $ 1,428.60 an ounce in Singapore today. Bullion gained 30 percent in 2010, central banks, pension funds and people sought protection against currency debasement and inflation after the government spent $ 2 billion to save the world economy from the worst recession since World War II.
The growth in demand
"Demand for physical gold has been mostly from China and the Middle East and I think this will continue and even intensify," said Crichton-Watt. "Asia is where the money is, so this is the center where the demand."
jewelry demand from China and India reached a record high in 2010, the World Gold Council said last month. Physical buying bar worldwide rose 63 percent to 204.7 metric tons in the fourth quarter, with Asia accounting for most of the purchase, the council said.
Assets held in bullion exchange traded products, or ETPs, stood at 2030.702 tonnes from 22 March. Holdings reached a record 2,114.60 tonnes on 20 December.
"The market is overbought lot here, so I think it would have to go much higher before we have a major correction," said Crichton-Watt. "However, very few people own so the price of gold will undoubtedly go much higher, and that will most likely end in a hobby."