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Fears of double-dip recession to power gold price
By Zhang Fengming |
September 14, 2010, Tuesday
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Online Edition
Online Edition
GOLD is expected to keep flying high amid concerns over double-dip recession and loose monetary policies in industrialized countries, an industry report said yesterday.
The precious metal touched an all-year high of US$1,294 an ounce in June as investment buying turned to the traditional hedge against sovereign debt crisis in Europe.
"I think we could easily see gold spike comfortably above US$1,300 before the year's out," said Philip Klapwijk, chairman of GFMS Ltd. "We will probably get a fair bit of profit-taking as we head into the New Year but I wouldn't take that as a sign that the party's over -- further gains in 2011 are far from out of the question."
The independent metals research consultancy said key to the ongoing price strength are the extraordinary monetary and fiscal policies being enacted by the industrialized world's governments in the face of sluggish economic growth, the specter of a double-dip recession and already uncomfortably high unemployment.
Such developments were seen undermining the value of equities or other conventional assets, ensuring the maintenance of low interest rates and stoking future inflation.
Gold's fundamentals were also seen as being unlikely to hinder any rally as robust emerging market economic growth meant jewelry demand would probably only fall appreciably and scrap rise if prices were to rally substantially, GFMS said.
In China, gold is cheered as a safe haven against inflation and a symbol of fortune. During the economic boom, demand for jewelry gold, especially the 24-carat gold, goes up with bulging wallets; during the time of economic uncertainties, investment appetite for gold grows strong.
The highflying gold prices didn't deter Chinese from buying the precious metal in the second quarter. In China, high price is not a buying terminator as investors are afraid of further price hikes. Bumpy prices, or prices with wild fluctuations, could halt buying as consumers are confused with price trend and sit on sidelines.
In the second quarter, China's consumer gold demand rose 29 percent to 120 tons as the world's second biggest gold market after India. Jewelry gold demand in China, including the Chinese mainland, Hong Kong and Taiwan, rose 5 percent to 82.3 tons. Gold investment surged 157 percent to 37.7 tons in the same period.
The precious metal touched an all-year high of US$1,294 an ounce in June as investment buying turned to the traditional hedge against sovereign debt crisis in Europe.
"I think we could easily see gold spike comfortably above US$1,300 before the year's out," said Philip Klapwijk, chairman of GFMS Ltd. "We will probably get a fair bit of profit-taking as we head into the New Year but I wouldn't take that as a sign that the party's over -- further gains in 2011 are far from out of the question."
The independent metals research consultancy said key to the ongoing price strength are the extraordinary monetary and fiscal policies being enacted by the industrialized world's governments in the face of sluggish economic growth, the specter of a double-dip recession and already uncomfortably high unemployment.
Such developments were seen undermining the value of equities or other conventional assets, ensuring the maintenance of low interest rates and stoking future inflation.
Gold's fundamentals were also seen as being unlikely to hinder any rally as robust emerging market economic growth meant jewelry demand would probably only fall appreciably and scrap rise if prices were to rally substantially, GFMS said.
In China, gold is cheered as a safe haven against inflation and a symbol of fortune. During the economic boom, demand for jewelry gold, especially the 24-carat gold, goes up with bulging wallets; during the time of economic uncertainties, investment appetite for gold grows strong.
The highflying gold prices didn't deter Chinese from buying the precious metal in the second quarter. In China, high price is not a buying terminator as investors are afraid of further price hikes. Bumpy prices, or prices with wild fluctuations, could halt buying as consumers are confused with price trend and sit on sidelines.
In the second quarter, China's consumer gold demand rose 29 percent to 120 tons as the world's second biggest gold market after India. Jewelry gold demand in China, including the Chinese mainland, Hong Kong and Taiwan, rose 5 percent to 82.3 tons. Gold investment surged 157 percent to 37.7 tons in the same period.
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