Gold hit a record high of $1,043.78 per ounce in intraday trade yesterday, as the dollar fell on reports that Arab states were considering pricing oil sales in currencies other than the dollar.
The price of gold for immediate delivery finished the session $31.70 ahead at $1,036.70/oz .
The report, which cited unnamed sources in Chinese banks and Gulf Arab bankers, was later denied by Mohammed al-Jasser, the director of Saudi Arabia's central bank. Russia and Kuwait also dismissed the speculation.
A falling dollar makes purchases of commodities cheaper in other currencies and gold purchases can also act as a hedge against inflation.
In sterling terms, the gold price is now at a six-month high. Gold prices last hit a record of $1,032/oz in March last year, as investors fled to safety during the unravelling of global credit markets. Gold purchases in India are also seasonally strong as the Diwali festival at the end of October, when gold is traditionally given as a gift, draws closer .
John Meyer, head of mining at brokerage Fairfax, believes that a confluence of factors is pushing the gold price higher. "Not only is Diwali approaching, but jewellery manufacturers have come late into the market to buy gold because they have been short of credit. They normally restock in the summer months," Mr Meyer said. "Jewellers are also having to compete with investment funds and exchange-traded funds."
He also noted that currency concerns are global and bars of gold are now on sale in Chinese department stores. When these factors are combined with concerns about a rising inflation in the US because of quantitative easing process, a strong bull case for the gold price is created.
Wednesday 7 October 2009
Gold hits record high as dollar falls on oil pricing fears
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