Gold price at record high as many find it sound investment

Gold price at record high as many find it sound investment

	Published : Sat, 10 Dec 2005 14:05 By : Andrew Stead Print this Story

LONDON: Gold price hit the record $530.40 an ounce in New York as investors, mainly in Asia, invested hugely in this commodity with its price appreciating as much as 16 per cent in a month.

Though analysts were predicting a correction in the market, there is speculation all around that the prices are going to go further north as investors find precious metals a better place to park their funds in view of weakening currencies and economic instability brought in by higher levels of inflation and low growth.

There is speculation that some of the Asian and European central banks may reduce dollar holdings and go for gold stocks.

Bullion merchants point out that gold price has climbed almost 20 per cent this year and it has almost doubled in the past five years. The price has risen on all the seven business days of December.

Spot gold was trading at $526.50/$527.20 an ounce in New York Friday, up from $519.50/$520.30 last quoted on Thursday. The price is up $75 since November 7.

Market watchers say apart from the fear of economic instability, short supply of the precious metal also contributed to speculative buying kicking up the prices. There are reports that fund managers have been buying the metal as a strategy to diversify portfolios.

The central bank in China is reported to be considering building up gold stocks. Earlier in November, Russia, Argentina and South Africa had expressed interest in increasing their gold holdings, though some of the European central banks have actually sold more than 100 tonnes since September.

The world gold reserves are estimated to be 31,000 tonnes. China holds 600 tonnes and India 358 tonnes, but gold's share of their reserves is just 1.1 per cent and 3.6 per cent respectively. This is, however, lower than levels in some European countries where gold accounts for over 50 per cent. In the U.S., the world's biggest holder, bullion makes up 64 per cent of reserves.

Other precious metals including silver (at $9.01/$9.04 against $8.88/$8.19) and platinum (at $1,000/$1004 against $998/$1002) also recorded peak prices Friday.