LONDON: Gold prices have surged this week as the precious metal profits from its status as a safe haven in times of economic turmoil. Global stock markets have tumbled days following the collapse of US investment bank Lehman Brothers, the sales of its peer Merrill Lynch and British bank HBOS, and after the rescue of US insurance giant AIG.
Gold prices surged $85 an ounce, or 11 percent, on Wednesday — the largest one-day increase for 28 years. “Gold staged its biggest one-day move since 1980 as the metal saw a surge of safe-haven buying,” said James Moore at TheBullionDesk.com. The price of gold stood at $863 an ounce late in London on Thursday, compared with $813 just 24 hours earlier.
On the London Bullion Market, the price of gold rose to $869 per ounce at the fixing yesterday.
The yellow metal, which is used in jewelry, dentistry and electronics, remains below its record high of $1,032.70 an ounce, reached on March 17, four days after it had breached $1,000 for the first time.
Gold was also in the headlines earlier this year after the precious metals consultancy GFMS revealed that China had been the world’s biggest producer of gold in 2007, overtaking South Africa which had held top spot for 100 years.
On Wednesday, GFMS forecast that gold could soon reach $950 an ounce but was unlikely to hit a new historic peak in 2008. “I’d be far from surprised if we see a further bank failure or two in the next few months. Add that to an unwinding of dollar gains and you should see gold back over $900 and maybe $950,” GFMS Executive Chairman Philip Klapwijk said in the group’s latest Gold Survey.
Since striking the all-time high, gold prices have slid below $800 as demand for the metal wanes owing to a slowdown in global economic growth. But prices are surging once more, helped too because gold is regarded by investors as a sound defense against inflation, which in many countries is driven by soaring oil prices. Oil briefly rose back above $100 a barrel on Thursday as central banks moved to boost liquidity on financial markets and as the dollar faltered.
A weaker US currency can make dollar-denominated gold cheaper for buyers of the metal holding foreign currencies, in turn pushing up demand for the metal.