Gold hits historic high

Nation/Bloomberg
October 8, 2009

Gold climbed to a record US$1,048 (Bt35,100) per ounce yesterday as the US dollar weakened and higher commodity prices spurred demand for precious metals as a hedge against inflation.

The Dollar Index fell for a fourth day, while crude-oil futures advanced to more than $70 a barrel for a third day. When gold passed $1,000 in February, sales of scrap metal sent prices down as much as 16 per cent in less than two months.

Gold price is surging against a growing loss of confidence in paper currencies and other assets.

"We're seeing no selling," Frederic Panizzutti, senior vice president of refiner MKS Finance, said in Ho Chi Minh City.

"I would not be surprised to see $1,100 by the end of the year."

Gold for immediate delivery rose as much as $6.33, or 0.6 per cent, to $1,048.43 an ounce in London and recently traded at $1,043.43. Spot prices are up 18 per cent this year, heading for a ninth consecutive advance. Gold for December delivery jumped as much as $10, or 1 per cent, to a record $1,049.70 an ounce on the Comex Division of the New York Mercantile Exchange and was at $1,044 early yesterday morning.

Palladium rose as much as 2.3 per cent to $315 an ounce, its highest since August 14, 2008.

"There's talk of inflation re-emerging and continuing weakness in the US dollar, which suggests the gold price may well continue to climb higher," said William Seddon, who helps manage $300 |million at White Funds Management in Sydney.

Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, increased 1.53 tonnes to 1,098.07 tonnes yesterday, the company's website showed.

In Thailand, Gold Traders Association president Jitti Tangsithpakdi said due to yesterday's historic high for gold prices, local gold-bar prices rose between Bt250 and Bt400 to Bt16,350 per baht weight for buying and Bt16,450 for selling, while gold ornaments were quoted at Bt16,115.08 for buying and Bt16,850 for selling.

He believes the jumps were due mainly to speculation amid a weakened dollar and said the global price would likely surge to $1,060 an ounce.

Jitti said the stronger baht was making local gold prices increase at a slower pace. Yesterday, the baht reached 33.35 to the dollar. If the currency weakens, the local gold-bar price could surpass Bt17,000 per baht weight.

YLG Bullion International chairman Pawan Nawawat-tanasub believes the resistance level of global gold has now shifted to $1,050 an ounce, with $1,033 a short-term strong support level.

She said gold prices had risen above the fundamental level, as the price at gold mines was only $750.

"It's highly possible that gold prices will rise to $1,100 by year-end, but the rally will come mainly from short-term speculation in hedge funds," Pawan said.

She said due to fundamental factors, she felt gold prices were unlikely to hit $2,000 $1,500 or even $1,200 as |forecast by some Western economists.

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Not Enough Gold for Everybody

Now that gold has climbed to a record high of US$1,048 (Bt35,100) per ounce, many people are clamouring for this barbarian metal. Obviously, gold is a natural hedge against the wobbling US dollar and also future inflation. As the US continues to pile up debt and the Federal Reserve cranks up its printing machine, investors have turned to gold as a protector of their wealth.

But the question is whether there is enough of the precious metal out there to go around, assuming we all want a gold coin or two.

Jeff Clark, senior editor of Casey¡¦s Gold & Resource Report, in its September 25 edition said there would not be enough gold to satisfy demand for everyone on the planet.

¡§According to the US Census Bureau, there are 6.78 billion Earthlings. Meanwhile, the CPM Group, a highly respected industry organisation, estimates there are 4.8 billion ounces of above-ground gold in the world. And this includes jewellery, electronics and dental,¡¨ he said.

¡§So even if everyone around the world volunteered to have their chain, cross or tooth melted into a coin, we¡¦re already short. Those towards the end of the line are out of luck.¡¨

The gold supply out there is very limited indeed. Of all the physical metal ever mined:

ĆSome 2.1 billion ounces, or 43 per cent, are found in jewellery and decorative and religious items.

ƒÜPrivate stock ¡V gold already held by private parties ¡V accounts for 1.1 billion ounces.

ĆOfficial reserves (central banks, International Monetary Fund, etc) stand at 1 billion ounces.

ĆIndustrial use accounts for 530 million ounces.

So for the general public, there is very little gold available for purchase in coin form.

¡§After all, you¡¦re not selling any of your gold, and neither are many banks or institutions. Most everyone is buying,¡¨ Clark said.

¡§So for those who don't yet have a gold coin (or you greedy investors who want more than one), this pretty much leaves us with mine production and scrap sources.

It is forecast that total new supply in 2009 will be around 122 million ounces. Only a small percentage of this is made into gold coins and bars, but if all of it were, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman and child on Earth this year.