Gold Emerges as Attractive Investment Vehicle
By Jane Han
Staff Reporter
Global inflation fears and economic uncertainties are prompting gold to make a comeback as a safe haven investment again, with the yellow metal passing $1,000 per ounce for the first time since March last year.
A Shinhan Bank clerk inspects a pile of 1-kilogram gold bars at the Jongro 3-ga branch, central Seoul, Wednesday, a day after world gold prices broke the psychologically important mark of $1,000 per ounce.
Experts say it is too early to tell whether the hot commodity will push up even higher into the quadruple digits, after values slid back in the second quarter on withering jewelry and industrial demand.
But latest concerns over the massive supply of dollars have been enough to reignite investors' appetite for gold.
U.S. gold futures ended at $998.8 an ounce Tuesday, but moved slightly above the psychological $1,000-an-ounce mark at one point in the day's trading, as more investors chose the bullion as a hedge against the depreciating U.S. currency and rising inflation.
Korean investors took the same strategy in the local front, where the consumer price of gold breached 180,000 won per "don" (3.75 grams) last week, up nearly 30,000 won from last year, according to the Korea Jeweler's Association.
Domestic banks that offer various gold-linked accounts say that the recent run-up in values is bringing increased inquiries.
"Investment activity has edged up in recent days as investors are setting their eyes on gold," said an official of Shinhan Bank, which posted a 34.2 percent investment return for Gold Riche, its gold investment account, over the past year.
Overall trading has gone up, the bank's data shows, as nearly 230 kilograms of gold traded hands Friday, up from 117 kilograms the day before.
Kookmin, Woori and other local lenders say they are spotting similar activities, as the fundamental factors bringing investors back to gold are likely to continue.
"Gold is likely to remain popular until confidence returns," said a manager at Woori Bank, adding that investors are looking to park money in a safe place amid signs that the worst of the economic downturn is over.
The precious metal is sought out by investors who rely on its proven protective attributes, especially when trillions of dollars are being printed and pumped into the global economy, said Cho Sung-bae, an analyst at Tong Yang Securities.
However, he warned that investors must take a cautious approach because gold's value may fail to hold the line.
"A long-term outlook is crucial because the current rebound is driven mainly by speculation," he said.
Physical demand for the yellow metal is so far showing no signs of turning around.
According to the Bombay Bullion Association, a major hub for gold and silver trading in India, one of the world's largest consumer markets, demand is expected to fall even more.
It estimated that gold imports will fall to 350 tons in 2009 from 523 tons last year.
jhan@koreatimes.co.kr
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