Click photo to enlarge
Gold spot prices. ODT graphic.
The $US6.7 billion ($NZ 9.3 billion) sale of 200 tonnes
of gold to India's Reserve Bank by the International Monetary
Fund propelled the precious metal to a new record high of
$US1087.45 per ounce in New York this week.
Throughout October and November, gold has hit four new highs
after it broke through the $US1000 mark in late-February this
year.
Recently, with the US dollar, Euro, British Pound and Yen all
weakening in the face of the global recession, governments
and investors alike are turning from currencies to gold
instead to underpin their respective treasuries and share
portfolios as a hedge against inflation.
The IMF has had more than 403 tonnes of gold for sale since
September and India's Reserve Bank, the first to make a
purchase, bought the 200 tonnes at an average $US1045 during
the past fortnight.
Craigs Investment Partners broker Peter McIntyre said the
price of gold for the next 12 to 18-months was was expected
to remain strong and buoyant as the world worked its way out
of the present financial crisis.
"Gold is now working like an insurance policy, a hedge
against inflation. There's very little confidence in
currencies at present," he said.
While long considered a safe-haven investment in times of
trouble, gold was increasingly seen as an official reserve,
as opposed to the present weakened US dollar. Investors are
considering gold as a standalone asset class in portfolios,
not just a safe haven.
The US central bank, the Federal Reserve, was meeting
yesterday to discuss increasing its interest rate, at present
in a floating range of 0%-0.25%, to stimulate the
recession-hit economy, and any upward move would not be
greeted well by markets.
Mr McIntyre said central banks had in the past been
criticised for increasing interest rates again too quickly.
The markets wanted the fiscal stimulus packages to stay in
place for a further 12-18 months, not be undercut or stalled
by interest rate rises.
Markets did not want to see a repeat of Japan's property
woes, where inflation-adjusted property prices rose by almost
75% in the five years to 1990, but since then had slumped by
about a third, with Japan's economy subsequently stalling, Mr
McIntyre said.
The "sugar rush" of trillions of dollars pumped into numerous
economies around the world to forestall the global recession
and prop up the finance sector was seen as inflationary and
would further underpin gold's strength, he predicted.
The Financial Times in London reported that the IMF
planned to sell the remaining 203.3 tonnes to other central
banks, or into the open market.
