National debt, regional investors and gold news

National debt, regional investors and gold news
22 May 2013

Debt denial?

Dubai’s current debt obligations are estimated at $48 billion for 2014 to 2016. But they aren’t a cause for concern according to Masood Ahmed, director of the IMF’s Middle East and Central Asia, who told reporters yesterday that the emirate had ‘alternative’ plans in place for repayments if asset sales did not meet the required levels. Debts in Dubai are relatively high – at 100% of GDP. The Institute of International Finance has also warned that although the UAE’s economy is in recovery, investors need to maintain a cautious approach. Read more here

Qatar investments

Many new investment projects in the UAE will be financed by cash loaned from banks in Qatar, reports announce. As the Middle East’s biggest lender, more and more UAE companies are experiencing growth due to money lent by Qatari banks. Most recently,  Qatar National Bank and Commercial Bank International revealed it had leant $350 million to Air Arabia which hopes to purchase 10 new Airbus A320’s. Find out more.

Gold hedging its future?

Petropavlovsk (the london listed gold producer) will pre-sell 55% of its future output for 2014, which means it is the first big producer to hedge more than half its future sales. The gold market is currently in precarious state with country reserve sell-offs forcing prices to fall below previously predicted levels. Industry experts have warned that hedging and selling gold forward caused gold prices to crash in the 1990s. Prices are set to fall further, but the future for gold investments remains uncertain. For more information, read here.

Comments

  • Colin
    Colin
    2013-05-22T14:28:35

    It is probable that Abu Dhabi will roll over Dubai's debt obligations in 2014 if reports are to be believed. Dubai always has to stick its neck out and be exuberant but with global declining oil demand and production it will impact the price and Dubai's ability to meet its ongoing obligations. I fully understand government stimulus is needed to increase business and consumer confidence but this stimulus has to be balanced with caution and not recklessness. It is interesting to see much of the big foreign investors outside the region are staying away from Dubai and not diving in on new debt/bond/sukuk obligations, despite potential returns higher than other parts of the world.. once bitten twice shy!

  • Colin
    Colin
    2013-05-22T16:46:56
    There are 2 reasons gold has lost its shine 1) QE with central banks is keeping inflation very low so gold is not required as a hedge and 2) there is a real fear that central banks who rarely sell big chunks of gold, like Italy, Spain and Portugal, Cyprus, Greece may have to sell off some gold to meet their debt obligations (as the UK did a few years ago)... this will flood the market with excess stock of gold.
     
    So as long as QE continues and as long as these EU countries carry such high debts that have to be paid, all will not be smooth in the gold market.
     
    I always think of gold as a gamble, too many unknown, unknowns. With a company we can make value estimates on the balance sheet, cashflow and profit and loss statements - gold offers none of this so in fact it is not a safe haven just a gamble.
     
    And finally Credit Suisse predict gold to fall to USD 1100 by the end of 2013
     
    My 2 cents worth:-)
  • joanna
    joanna
    2013-05-22T19:39:57

    Brilliant answer! You've convinced me :) 

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