Summary
1. Gold Prices has touched its new highest record of $1100.
2. Where will Jewelery Industry head?
3. What is the future of Gold?
Analysis
The price of gold, which recently shot to a record high, has a bright future thanks to improving demand caused by the ongoing financial crisis. Gold struck an all-time high of $1,070.80 an ounce on October 14 as a sliding dollar made the precious metal cheaper for investors holding other currencies, pushing up demand for the commodity also used to make jewelery.
The price of gold has risen by more than 20 percent since the start of 2009. The demand for gold was improving for a number of reasons, including the long-term threat of inflation — a consequence of the financial crisis that erupted in earnest a little more than a year ago. At the same time, "a dearth of new discoveries" amid increased mining costs has dented the amount of gold.
Meanwhile, while the global economy is far from strong, "physical gold is regarded as the only secure asset," said Mehdi Barkhordar, managing director of Swiss refiner and ingots producer Produits Artistiques Metaux Precieux (PAMP). "There is a fundamental shift in the dynamics of the gold market," Barkhordar told the conference, adding that gold had become "mainstream."
London emporium Harrods surprised the retail industry in October by starting to sell gold bars, with prices fluctuating according to the current market price. The smallest ingots, weighing one gram, have sold for about $49 (GBP 30) and the largest, weighing 12.5 kilograms, have cost more than one quarter of a million pounds.
"Gold remains a safe haven and preserves the value of investment," said Aram Shismanian, chief executive officer (CEO) at the World Gold Council (WGC). "It becomes an asset class in itself." Shismanian also noted that pension funds were beginning to buy gold, describing the move as "a significant shift."
In reaction to the Reserve Bank of India's purchase of 200 metric tons during the past two weeks of October, although the metal's upside has been capped by the stronger U.S. dollar. The Bank bought $6.9 billion in gold from the International Monetary Fund (IMF) in two October installments. The news sent spot gold on a hunt for direction as the price ranged between $1,055 an ounce and $1,067 an ounce in New York during the first two hours of trading.
"The announcement out of India played a big part of it," said Bart Melek, a global commodity strategist with BMO Capital Markets. The Reserve Bank of India said it bought 200 metric tons of gold from the IMF between October 19 and October 30. The transaction involves nearly half of the 403.3 metric tons that the IMF had earmarked for sale.
"The IMF has sold almost half of its 403 tons without a major disruption; we view this as supportive of the gold price," said Walter de Wet, an analyst with Standard Bank. "The rest of the IMF's holdings will probably be sold to other central banks."
December gold jumped as high as $1,066.90 in the wake of the news, its strongest level since October 23. However, it has since pared its earlier gains due in large part to the strength of the U.S. dollar, Melek said. The December dollar index was up 0.395 point to 76.855.
Some overseas analysts said the bank's move to buy gold appears to be an asset diversification, rather than an attempt to move away from U.S. dollar holdings, thus it did not spark a sell-off in the greenback. In fact, a research report from BNP Paribas said the dollar may have been helped by India paying the IMF in special drawing rights (SDRs) and not in dollars.
"By using SDRs, the Bank left the impression that it does not like paper currencies in general, suggesting that other major Western currencies were not seen as any better than the dollar," BNP said.
The dollar also firmed against most major currencies as market participants continue to reduce positions ahead of this week's central bank meetings, including the Federal Open Market Committee, said a research note from Brown Brothers Harriman.
With the dollar stronger, other precious metals were on the defensive. December silver was down 11.5 cents to $16.325. January platinum slid $9.50 to $1,328.60 an ounce, while December palladium declined $6.70 to $319.65.
I have mentioned in my previous analysis the fact that Gold may jump to $110 per ounce by oct-nov09 and now it seems that it may cross the level of $1200 per Ounce by Jan2010 and all this because of less fate in Dollar and weak dollar may lead ti much more.
This will have a more adverse effect towards the Jewelery Industry around the world and it will become more difficult to reach the goals in coming future.
