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Gold hits record on safe haven buying
 
 

  London: Gold hit record highs for the fourth day in a row yesterday, boosted by growing expectations for US interest rates to remain exceptionally low as the economy struggles, while silver came in sight of 30-year peaks.

Data on Friday showed Americans were at their most pessimistic in over a year this month, as growing fears about job security and finances undermined US consumer sentiment and painted a muted picture of price pressures.

This helped reinforce the belief that the Federal Reserve will signal its intention to resume large-scale purchases of government bonds to keep interest rates low when it meets today, propelling gold above $1,280 for the first time.

Spot gold rose 0.4 per cent to $1,280.65 an ounce by 1135 GMT, having hit a record peak of $1,283.35 earlier. US gold futures for December delivery rose 0.5 per cent to $1,282.50 an ounce.

"Certainly, this will depend on macro data to come, but the pressure on the US central bank is gradually building and such a move would be supportive for gold as monetary base expands further and the dollar weakens," Andrey Kruychenkov, an analyst with VTB Capital, said in a note.

Confidence in the global economy is flagging and the prospect of low interest rates and a weaker dollar set a solid foundation for gold, which holds more appeal in such an environment as it bears no yield of its own.

Dollar weakens

The dollar slipped broadly yesterday, under pressure from speculation about the chances for a resumption of quantitative easing. This in turn boosted European equities.

Spot gold prices have risen by more than 16 per cent this year, driven by the desire among investors for a safe store of value in light of major currencies, equities and bonds becoming increasingly volatile.

Holdings of bullion in the SPDR Gold Trust rose by another six tonnes on Friday, bringing net outflows to two tonnes this month.

News Courtesy: Reuters - Sep 2010


Gold jewellery demand in UAE retreats

UAE market is more likely to favour other forms of jewellery

 

  

Gold's continued rise on world markets has impacted the gold jewellery trade in the UAE, triggering a drop in demand from gold-loving consumers, a former World Gold Council (WGC) official said on Thursday.

Rolf Schneebeli, former WGC head, said the current high price has prompted consumers to hold back and wait for better deals. However there are signs investor demand remains robust and that prices will drop in the short term.

"This is again the ‘mood of the souq', when clients wait to buy at a lower price. The investors' demand for gold continues to be strong in bars and coins as a trend," Schneebeli told Gulf News.

Gold prices propelled to an all-time high of $1,300 (Dh4,774) a troy ounce last week. As the prices of the precious metal are quoted in US dollars, to which the UAE dirham is pegged, any price movement on world markets also impacts the domestic trade. Besides, given the strong link of jewellery and bullion rates, price changes will also apply to jewellery.

"The price increase will continue on a trend basis. However, in the short term, one could expect a price correction on the downside. This could well be a short-term dip of $50 per ounce, which is a buying opportunity for long-term investors as well as speculators," said Schneebeli.

"The good thing is that the price increase so far has been rather controlled and continuous. While certain people talk of a potential bubble in the precious metals sector, this seems not yet imminent as we constantly see new highs followed by a new base building on a high level," he said.

As a result of higher gold prices, the UAE market is now more likely to favour other forms of jewellery, including silver and stone sets.

"The substitution effect will continue. We will see more sales in stone set and silver jewellery, which is a challenge to the jewellers who have to venture more and more into less familiar product categories," said Schneebeli.

As far as investors are concerned, their preferred assets these days are Swiss francs, yen and gold. All of these had a strong run in the short term, but are also considered to be the best protection against looming inflation.

News Courtesy: Gulf News. By Cleofe Maceda, Staff Reporter - Pulished Oct 2, 2010.

 
   
   
   
 

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