Can Qatar lose the rights to host 2022 Football World Cup?

No, not before until The Sunday Times alleges that FIFA’s Executive Committee members Issa Hayatou & Jacques Anouma took bribes of $1.5m each to vote for Qatar. Although, Qatar's official denied such act.


In reaction, FIFA president Sepp Blatter, who is standing for re-election, has refused to rule out a re-run of the vote to host the 2022 World Cup, if allegations that Qatar paid millions of dollars in bribes to secure its win are proven. He also said, “We are anxiously waiting for these evidences or non-evidences in order that we can take the adequate steps.” 


There is a least possibility to snatch the world cup host-ship from Qatar now, even if bribery is proven it could stringent the rules of voting methodology & may add more transparency in awarding rights to host the World Cup for future.


We have seen that the decision to host the 2022 World Cup in Qatar was graded as having "high operational risk", generated criticism from media & some countries officials on the concern of Qatar’s suitability to host the biggest sporting event, with regards to hot weather, press control & human rights in Qatar, being an Islamic state, rule under Sharia laws.


Being an analyst, I cannot completely ignore the possibility of the other way around. If Qatar stripped of 2022 World Cup then it would be the biggest U-turn in the FIFA’s history & could be devastating for FIFA & Qatar’s reputation.

What Drives Gold Prices?

There are many factors contributes in Gold price movement. Apart of Demand/Supply fundamental factor, low interest rates in many developed countries (e.g. US, Japan, UK & ECB) which compels investors to own this precious metal which gives better risk – adjusted return, especially when two other important factors which are key to determining the direction of gold prices also favors.

One is Dollar index, which is plunging & the other is crude oil prices which is surging along other commodities.

On-going turmoil & uprising movements in MENA also makes investors jittery so they opt for safe haven. Another factor which pulls the demand is growing wealth in middle class population in many Asian countries especially in India & China.

What drives current Gold prices?

There could be countless factors, but I specially want to talk about two factors which I can quantify relatively easily.

1)      Gold prices have negative correlation with US dollar index (trade weighted dollar). As US Dollar index is declining, therefore gold is going in opposite direction                 

Correlation between Gold & US Dollar Index	-0.44
USD Dollar Index YTD** Performance	-5.30%
Gold YTD** Performance	5.20%
*3 year (2008-2010) correlation
** 1st Jan 2011 - 19 April 2011

Source: World Gold Council & Bloomberg

                                                       

Gold & US Dollar Index:                                                                                                                                                                                                                                                                                                   

                                                           

 2)      Gold prices have positive correlation with crude oil & other commodity Indices. As Crude oil prices along with commodities are increasing (upward pressure on inflation), therefore gold is surging too.

Correlation* between Gold & Brent Crude Oil	0.35
Brent Crude Oil YTD** Performance	28.80%
Gold YTD** Performance	5.20%

*3 year (2008-2010) correlation
** 1st Jan 2011 - 19 April 2011

Source: World Gold Council & Bloomberg

MENA - Economic Outlook

Despite all the whispering & uprising movements, which challenges Middle East & North Africa (MENA) region stability by large, the truth is its growing. Although, growth varies widely across the MENA region.

There are mainly two blocks within MENA region, one is oil importing countries & the other is oil exporting countries.

GDP Growth:

MENA has 5.0% share in World's total GDP, based on purchasing power parity (PPP).

In next couple of years, it is expected that MENA region will grow in tandem with World growth rate; better than advanced economies but significantly lower than emerging & developing economies.

GDP in the MENA region is projected to grow at 4.1% in 2011, edging up to about 4.2% in 2012. In the group of oil exporters, growth is expected to pick up to 4.9% in 2011 while in the group of oil importers, GDP will slowdown to 1.9% in 2011. In 2012, Oil importers economy will strongly bounce back to 4.5%, on the other hand oil exporters group’s economic growth will take a small dip to 4.1%.

                                                                                                                                                                                              

Real GDP Growth
(Annual percent change)	2010	2011F	2012F
World	5.0	4.4	4.5
Advanced Economies	3.0	2.4	2.6
Emerging & Developing Economies	7.2	7.3	6.5
Middle East & North Africa	3.8	4.1	4.2
Oil Exporters	3.5	4.9	4.1
Iran	1.0	0.0	3.0
Saudi Arabia	3.7	7.5	3.0
Algeria	3.3	3.6	3.2
United Arab Emirates	3.2	3.3	3.8
Qatar	16.3	20.0	7.1
Kuwait	2.0	5.3	5.1
Iraq	0.8	9.6	12.6
Oil Importers	4.5	1.9	4.5
Egypt	5.1	1.0	4.0
Morocco	3.2	3.9	4.6
Syrian	3.2	3.0	5.1
Tunisia	3.7	1.3	5.6
Lebanon	7.5	2.5	5.0
Jordan	3.1	3.3	3.9

Only major Oil exporting & importing countries mentioned

Source: IMF, April 2011

Amongst resource rich region; GCC, it is expected that Qatar’s economy will shine both in near term (2011-2012) & medium term (2011-2016) while UAE will lag in the GCC region.

Source: IMF, April 2011