In 2007, demand for gold is expected to outstrip supply by 234 tons.

Whenever investors get serious jitters about the US economy or seek a refuge from a drop in the dollar, they turn to gold.
Given the current state of their psyches, it’s no surprise that gold, long viewed as a safe haven, closed recently just a shade below its all-time high of $850 an ounce in 1980, reported Businessweek.com.
After reaching $841 on November 8, the price retreated to $789 by November 30, spurred by profit-taking after a three-month rally fueled by mounting fears about the health of the financial system.
The 1980 rally came amidst an inflation surge and the Soviet Union’s invasion of Afghanistan. That spike was followed by a swift plunge, but the latest gold swell probably isn’t over. Adjusting for inflation, that 1980 high would be about $1,800 in 2007 dollars, according to Haver Analytics, an economic research firm. That suggests today’s price has room to run.
Analysts and fund managers also point to supply-and-demand factors that are keeping them bullish on bullion. For 2007, demand for gold is expected to outstrip new supply by 234 tons, the first deficit since 1979, according to Barclays Capital in London. That’s more than 6 percent of the annual supply of 3,600 tons that comes mostly from mines but also from sales by central banks and recycled scrap.
It could be a wild ride in the coming months. Speculators and hedge funds made large bullish bets in the futures market starting in August as the Federal Reserve started to cut interest rates. Once the Fed stops paring rates and the dollar stabilizes, gold becomes a less attractive investment. That should happen early next year, says Suki Cooper, a precious-metals analyst at Barclays Capital. Wall Street leader Goldman Sachs (GS) even recommended selling gold as one of its 10 best trading ideas for 2008.
Demand is growing, thanks to an increase in jewelry purchases by the burgeoning consumer classes in India and China. Increasingly popular exchange-traded funds around the world also make investing directly in gold easier than ever. On the supply side, mining outfits are struggling with higher costs, political upheavals, and less productive mines.
Exchange-traded funds (ETFs), like the $15 billion Streettracks Gold Shares Trust, are the new kids on the block. Gold-oriented mutual funds have been around for years, but they mainly buy mining stocks. The new ETFs, rolled out over the past three years, buy actual bars of gold and store them in warehouses.
By holding gold directly, the funds affect the price because they remove supply. The Streettracks fund, run by State Street Corp. (STT) in Boston, owns 609 tons of gold held in a London vault.
In the third quarter, ETFs bought 138 tons of gold, or 15 percent of all the gold produced and six times more than they bought in 2006’s third quarter. Because much of the demand for the ETFs has come from long-term investors, the funds are rarely sellers.
In the past, rising gold prices have also boosted mining stocks. The miners are up about 18 percent this year, but that’s only about half of the gain for the metal. Their main problem is that costs for steel, fuel oil, and other materials have risen even faster than gold prices. Shares of NovaGold Resources (NG), a mining company based in Canada, tumbled more than 50 percent on November 26 after the company said it had to stop construction of a new gold, silver, and copper mine in Galore Creek, B.C., because of rising costs.
Last year the company estimated the mine would cost less than $2 billion. The cancellation followed a new projection of $5 billion. That’s bad news for the mining stock shareholders, but a plus for anyone who already owns gold and is banking on higher prices in the years ahead.

Recent consumer safety scandals have brought home the inadvisability of manufacturing products or running any aspect of a business at the lowest possible cost.
So risky has it become, and consumer fears so widespread, that the European Commission and other governing bodies in Europe and around the world have ramped up initiatives to regulate product quality and safety. It is a hard truth though that government regulators can’t do everything.
According to BBC, global companies must assume responsibility, and there is a powerful new force that imposes a more potent and far-reaching natural assurance of product quality from global companies--namely “worldsourcing“.
By looking out for the best value all around the world, modern companies are building the strongest safeguards of quality--their brands. Worldsourcing is based on the fact that for a company, its brand is the most valuable asset, more important than nationality or location.
By reaching out to the entire world in search for the best ideas and talent, a company not only refines its brand and nurtures its essence, but also exposes it to a multitude of probing eyes.
Globally, it is evaluated not by nationality, but by the quality of its goods, services, governance, transparency, environmental practices, degree of corporate social responsibility. And the level of value it delivers to customers worldwide.
Worldsourcing is a logic that dictates companies to focus on the best value and quality of products. All aspects of business, including materials, human talent, innovation, logistics, infrastructure and products, are sourced wherever they are best available.
And then companies can deliver products to wherever demand is, anywhere in the world. It is crucial to understand the difference between worldsourcing and outsourcing.
Outsourcing is about lowering costs by shifting non-essential operations to a contractor in order to cut costs.
Worldsourcing is about increasing value and quality, not just lowering costs. All parts of a global enterprise are worldsourced to where the best resources, talent, ideas and efficiencies exist.
Senior executives can be based in London, marketing can operate from Mumbai and research and development might be headed in Silicon Valley. In a world united by internet and globalized language and culture, it becomes not a choice but a necessity to worldsource.
By transforming the fundamental rules of global business, worldsourcing ensures protection of consumers and manufactures everywhere. But how can this potential be realized?
Companies that operate globally and worldsource their goods and services around the world are exposed to probing light and criticism from customers and government regulators in all countries and continents they operate.
Only by adhering to the highest standards of governance, transparency and quality can companies hope to achieve a global trustworthy brand. In a day when the internet allows information to flow freely, reporting on events as they happen, no organization can bend the rules or adhere to subpar quality standards without damaging its global brand, which is the most important asset a company has.

Peruvian President Alan Garcia plans to introduce in Congress a draft law that would facilitate the purchase by foreign investors of communally owned land in rural indigenous villages.
Although analysts say the initiative will spark social conflict, the president argued that the small farmers have neither the training nor the economic resources needed to add value to their property.
The draft law states that only 50 percent plus one of the members of the communities would be needed to approve a sale or lease of land to private investors.
Currently, article 11 of the Private Investment Law states that the consent of two-thirds of the general assembly in indigenous villages is needed to sell or lease land owned by the community.
Defending his plans to foment investment in Peru, Garcia dubbed those who criticize his initiative as “dogs in the manger“, saying they are moved by the feeling that “if I can’t do it, nobody should.“
“That means there are many resources going unused that cannot be sold, that are not receiving investment, and that are not generating work. And all of this because of the taboo of obsolete ways of thinking, and because of idleness and laziness,“ wrote the president, in one of two articles published on the issue in the Lima newspaper El Comercio.
Community owned land in the villages is “idle land, because the owner has neither the training nor the economic resources, which means it is owned merely in name. That same land sold in large plots would bring in technology,“ he argued.
“What Garcia is trying to do is strengthen the capitalist model by making the legal framework for investors even more flexible,“ economist JosŽ de Echave of CooperAccion, a local non-governmental social development organization, told Ipsnews.net.
Until the administration of Alberto Fujimori (1990-2000), communally owned land in indigenous villages could not be sold or embargoed. But in the 1990s, the mechanism of the general assembly vote was created, to allow communities to sell or lease land to third parties, if approved by two-thirds of the members.
Garcia’s announcement forms part of a strategy established by his government several months ago, when it set out the aim of drawing in 10 billion dollars in investment by the mining industry by the end of the president’s term in 2011.
But it is one thing for campesinos or peasants to sell off their land voluntarily, as the legitimate owners, and another for the president to call those who decide not to do so “dogs in the manger“ who are seeking to block development, say critics.
“This will undoubtedly generate resistance and conflicts in the communities,“ said sociology Professor Sinesio Lopez at the Pontificia Catholic University of Peru.
The highest profile case of conflict over land involves highlands communities in the northern region of Piura, which are fighting plans by the Minera Majaz mining company, owned by China’s Xiamen Zijin Tongguan Investment Development Co.
Local campesinos accuse the company, which was a subsidiary of the London-based Monterrico Metals until early this year, of usurping their land when it began to explore for copper and molybdenum in 2003 without obtaining approval from a two-thirds majority in the community general assembly.
On November 23, criminal court Judge Rafael Romero in the province of Ayabaca launched a legal inquiry over the issue against the Majaz board of directors.
De Echave says that no development proposal is possible without the participation of local campesinos, who occupy 80 percent of the land in some regions.
According to recent estimates, indigenous people account for 45 percent of Peru’s 28 million people, with most of the rest of the population being of mixed-race (mestizo) heritage, and around 15 percent of European descent.
In Peru’s Andean highlands, the area for which mining companies were granted permits by the government for mining operations grew 77 percent between 2002 and May 2007: from seven million to 13.2 million hectares, according to CooperAccion.
“Now it’s all about profit, while social questions are completely ignored,“ said Lopez. “The president has forgotten about the environment. We hope that he will take up that issue in another article.“

The total size of sovereign wealth funds could reach $12 trillion by 2015 and, perhaps more important, surpass the worldÕs total official reserves within five years.

As sovereign wealth funds rapidly become one of the most powerful forces in global finance, one key question has emerged: Should they be feared or revered?
As reported by Gfmag.com, with the subprime-induced credit crunch causing stocks of financial giants such as Citi and Merrill Lynch to plunge amid fears that there is worse still to come, could it be that a new breed of “white knight“ is lurking in the wings--potential investors that are virtually ungeared and sitting on a mountain of cash, longing to buy into the financial know-how and market expertise of the world’s premier financial institutions? Not to mention well-established brands in retail, manufacturing, energy and, yes, even real estate?
The answer is yes. They are the sovereign wealth funds of oil-rich Persian Gulf emirates and the export-led “wonder-economies“ of Asia such as China and Singapore. Taken together, they already control assets valued at more than $2.2 trillion, and, on the back of record commodity prices and booming exports, they are expected to grow fast within the next decade, reaching between $12 trillion and $14 trillion.Ê
They are already buying into a range of financial companies in the United States and Europe. The China Investment Corporation’s $3 billion stake in hedge fund Blackstone Group may be sitting on a paper loss despite the 4.5 percent discount to the IPO price, but that has not discouraged China from putting another $1 billion into Bear Stearns.
While the injection of fresh capital in US and European financial systems might be welcome, the prospect of state-owned and often secretive sovereign funds picking up what could be viewed as “strategic assets“ has sent a tremor through the halls of power.
National governments are making similar noises. Germany’s chancellor Angela Merkel has called for potential conflicts of interest between sovereign funds and the host countries where they want to invest to be addressed with some urgency.
The US has gone further in upping the ante, with protectionist noises emanating from congressmen of all political leanings and literally dozens of bills on the subject being promoted. During the run-up to next year’s election, more voices will join the protectionist chorus--not just on trade and currency exchange issues but on the looming threat of more strategic stakes or even takeovers by foreign, state-controlled investment vehicles.Ê
Gerard Lyons, chief economist and group head of global research at UK-based (but mainly Asian-markets-driven) Standard Chartered Bank, agrees that the financial muscle exercised by sovereign funds is going to be felt increasingly if globalization continues.
As economic adviser to Standard Chartered’s board, Lyons has a privileged viewpoint, since several sovereign funds are major stakeholders in the bank. Singapore’s Temasek Holdings has a 17.2 percent holding, while Dubai’s Isthimar spent $1.2 billion buying into the bank’s stock.
In an October report, “State Capitalism: The Rise of Sovereign Wealth Funds,“ Lyons predicted that, should current trends continue, the firepower available to sovereigns could increase from around $2.2 billion today to $13.4 billion in 10 years’ time.
That is one of many guesstimates. Morgan Stanley’s Stephen Jen calculates the total size of sovereign wealth funds could reach $12 trillion by 2015 and, perhaps more important, surpass the world’s total official reserves within five years. Others suggest a slightly lower figure of around $10 trillion within a decade.
But as Harvard professor and former chief economist at the International Monetary Fund (IMF) Kenneth Rogoff points out, if they reach anything like that size, then “they are the global financial system.“
Lyons anticipates that sovereign funds and other state-controlled vehicles, such as national oil companies, part-privatized banks and other “national champions,“ will be used “to boost strategic links with countries that have not shared fully in globalization or which have been shunned by the West.“