Gold still shines in longer term, says bullion dealer

Degussa Goldhandel CEO Wolfgang Wrzesniok-Rossbach says the company is using Singapore as a hub for its strategic expansion plans in Asia.
Degussa Goldhandel CEO Wolfgang Wrzesniok-Rossbach says the company is using Singapore as a hub for its strategic expansion plans in Asia.ST PHOTO: YEO KAI WEN

The boss of one of the world's largest bullion dealers - which opened its first Asian office in Singapore last week - believes gold has rosy prospects over the longer term although prices are depressed now.

Mr Wolfgang Wrzesniok- Rossbach, chief executive of German firm Degussa Goldhandel, told The Straits Times in an interview last week that he remains bullish on gold and expects prices to rebound to about US$1,500 an ounce next year.

Gold prices have been trending downwards in recent years amid a dimming global economic outlook.

Prices for spot gold stood at around US$1,149 an ounce last Friday, about 39 per cent lower than its most recent peak of US$1,882.96 in September 2011.

"We have had a long phase of rising prices, which was probably not very healthy," said Mr Wrzesniok- Rossbach. "What we're seeing today is a counter-reaction to that."

He noted that the uncertainty over the global economy could, in fact, spell a bigger appetite for the precious metal among investors.

"A lot of people still buy it as a kind of safe haven (asset) for their portfolios," he said.

"Take China. With the stock markets being volatile, the property market in the doldrums, what should they now invest in? They go for gold.

"And for someone who's completely digital today, this is a physical asset he can hold in his hands. If you buy something as a safe haven (asset), you'd want to have possession of it."

Mr Wrzesniok-Rossbach said that the firm, which employs about 150 staff worldwide, expects to draw a turnover of €1.6 billion (S$2.5 billion) for the 2015 financial year, up on the €1.3 billion in 2014.

"Global demand is picking up again, production is stable, scrap gold is declining, fewer people are buying gold exchange-traded funds or paper gold, and central banks all over the world are buying gold," he noted.

"If you take all this into account, we have a lot more positive reasons to believe gold is going back up - though not in a very steep way, but over a slow process."

The company's new 3,000 sq ft boutique in Orchard Road offers physical gold, silver and platinum products, from investment bars to wearables. It also has 1,500 private safe deposit boxes for customers to store their purchases.

Mr Wrzesniok-Rossbach said that its expansion here - which comes hot on the heels of its recent openings in London and Madrid - marks a "significant step" for the company.

"Asia is a critical market for us and Singapore is a key stepping stone for our strategic expansion plans in the region," he said.

"Using Singapore as a hub into the region with our retail products, we hope to supply partners and trading houses in other countries within the region to serve the local markets."

Mr Wrzesniok-Rossbach noted that Singapore, which has been ramping up its efforts to become a gold trading hub in recent years, offers solid infrastructure and a supportive business environment that were key factors in the firm's consideration to set up shop here.

Mr Raphael Scherer, the firm's chief international officer, said in a statement: "As part of our strategy to be a truly international company, it is imperative we have presence in Asia and explore the dynamic and diverse economies in the region.

"Singapore, as the gateway to Asia, is the perfect starting point for us."

A version of this article appeared in the print edition of The Straits Times on November 03, 2015, with the headline 'Gold still shines in longer term, says bullion dealer'. Print Edition | Subscribe