EVERYBODY knows the decision by the Reserve Bank of India to buy 200 tons of gold is the best thing since sliced bread for the South African gold industry. Likewise, the trade is negative for the dollar. It is the first major purchase by a central bank for more than 30 years. But more than that, it signals that other central banks which have been selling down gold stocks are unlikely to do so in the near future. The gold price understandably hit a record of 1091,60/oz yesterday on the news. Yet there is a need to keep this in perspective a bit. The Indian reserve bank’s total dollar holdings are about 268bn. Buying the gold cost it 6,7bn, so the new gold purchase hardly makes a significant dent in its overall profile of foreign currency holdings. India is also a place with a strong tradition of gold holdings and a big retail market in the metal. Also, the purchase was from the International Monetary Fund, and its gold holdings are about 3000 tons. So the 200 tons now in India’s hands hardly creates a significant dent there either. Still, in a world where sentiment is kind, sentiment just shifted in gold’s favour, and who are we to look a gift horse in the mouth too closely? And it could be the start of a trend. James Moore, an analyst at TheBullionDesk.com in London, said yesterday the Indian purchase “could give rise to further diversification into gold in coming sessions as investors shy away from the dollar and fiat currencies (currencies not linked to physical reserves) and turn towards physically backed assets”. ONE consequence of the global recession — in which developed economies were generally the hardest hit — has been the acceleration of the trend of growing trade between developing countries at the expense of the traditional north-south trade. And while energy and minerals make up the lion’s share of African exports, there is growing interest in Africa’s uncultivated arable land — only 25% is cultivated — as a source of food for export, according to a Reuters report. China has displaced the US as Africa’s main trading partner while Brazil and India have increased trade with the continent substantially this decade. The report says Brazil’s annual trade with Africa has jumped from 3,1bn in 2000 to 26,3bn last year — a rate of growth outpaced only by China, which has seen two- way commerce soar tenfold this decade to 107bn. Indian trade with Africa has jumped from 4,9bn to 32bn. “Africa’s agricultural potential will become an increasingly potent driver of the BRIC’s (Brazil, Russia, India and China’s) commercial engagement with the continent,” Standard Bank said in a recent report. Now that’s a goal worth working towards: for Africa to become the dominant supplier of the one resource that everybody needs and always will need: food. THE major developing economies also top the charts in predicted gross domestic product (GDP) growth for next year. The Economist Intelligence Unit predicts growth of 8,6% for China, 6,3% for India and 3,8% for Brazil, with SA next best at 3,1%. (SA’s economy is expected to contract 2,2% this year.) Of the developed economies, the US is expected to grow at 2,5% next year with the Euro area at 1,2%. At end-October, the International Monetary Fund raised its forecast for global GDP growth for next year to 3,1% from its July forecast of 2,5%. Imara Asset Management says the road towards recovery “has and will continue to be bumpy” but is heading in the right direction. It points to two important factors working in favour of equities as an investment option. The first is extreme global liquidity at a time of low interest rates and subdued inflation (in the short term). The second is that the “western part of the globe” is past the nadir of the recession while the East is accelerating GDP growth.

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