Gaza war gives ammunition to Gold price rise!

January 09, 2009

Commodity Online
MUMBAI: Will the Gaza war help boost gold prices? It seems so. Even as the war is raging in Gaza Strip, concerns over an oil crisis and uncertainty over equity markets forced people to turn to gold as the best investment option.

Traditionally, in times of uncertainty and volatility in currency, gold has always been a safe haven.

According to reports from across the globe, investors, who are seeking an alternative route to investment other than the stock market, are now picking up gold as the best option.

HSBC’s this week’s forecast also helped the demand go up. HSBC upped 2009 and 2010 gold forecasts on haven buying.

Even though the yellow metal heavily fluctuated this week, experts said the direction in which it is moving is mostly up.

On Monday, gold climbed to $881.75 an ounce on safe-haven buying after Israel launched a ground offensive in the Gaza Strip, while gains in oil boosted investor appetite for the precious metal.

However, it fell on Wednesday as a stronger dollar versus the euro and gains in share prices reduced bullion’s allure as an alternative asset.

On Thursday, gold firmed above $840 per ounce — recovering from a two-week low of $833 — as continued worries about conflict in West Asia, a climb in oil prices, and financial market instability helped spur buying.

The figure compares to $720 an ounce a month ago after a heavy plunge in oil dragged gold prices down.

Gold prices vary depending on oil prices as well as supply and demand factors. People are now rushing to buy gold, so demand has intensified, pushing prices up.

According to traders, people began to feel that gold prices will underpin again, so demand increased on gold coins and bullion as a source of investment.

The ongoing global market turmoil has improved prospects for the yellow metal, given it is seen as a safe haven in a time of rising inflation, a weak US dollar, and economic uncertainty.

Low visibility on prospects for the global economy could mean more money is poured into gold as a safe haven.

HSBC raised on Thursday its 2009 and 2010 gold price forecasts on expectations the faltering global economy will prompt investors to buy into the yellow metal as a haven from risk.

The bank increased its 2009 gold forecast to $825 an ounce from $800, and its 2010 price view to $775 from $725, but left its long-term forecast at $700.

The bank said it believes gold will attract safe-haven buying from risk-averse investors this year, as economic uncertainties are likely to persist for the foreseeable future.

While gold fever is sweeping among investors, demand on fine jewelry is slipping. Demand on gold as an investment is flourishing above average … but demand on fine jewelry is very slow. It’s half what it used to be.

At times of high inflation and economic slowdown, demand for luxury gold strongly topples.

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