Low Prices Could Spark Gold Buying

Falls that have taken gold prices to their lowest point in more than 12 years could spark a pre-Christmas jewellery buying spree in Asia, dealers around the region said yesterday.

But the long-term outlook for the yellow metal might not be so buoyant as the impact from the financial crisis now gripping the region remains unclear, dealers and industry executives said.

"The problems in Southeast Asia will mean reduced purchasing power as the reduced strength of the currencies becomes obvious," said a source at the Chinese Gold and Silver Exchange Society in Hong Kong.

Insecurity in Hong Kong and a weakened rupee in India, the world's biggest gold consumers, could see the bullion take a beating, he said.

 

But in the immediate term, low prices were a boon for bargain hunters, dealers said. "Prices at these levels will lead to greater interest in Hong Kong because people will want more jewellery now," said a dealer in the former British colony.

"This really is a very low level, so I think people will start investing in gold again," he said. A dealer in Singapore agreed.

"There's a lot of interest in the yellow metal now. We will probably see more buyers as a lot of companies are boosting their stocks," he said. On Thursday, premiums for gold kilobars in Singapore were indicated at 40 US cents over spot London prices from 70-100 US cents on November 26, traders said.

Gold prices slipped to fresh 12-1/2-year lows on Thursday after New York and Asian markets digested the news that the Argentine central bank had cleared its vaults of gold. Also adding pressure to tottering sentiment was fresh selling out of Australia as the local miners sought some relief from falling prices by taking advantage of their domestic currency at a four-year low against the US dollar.

Hong Kong Friday midday spot gold firmed to US$286.60/287.10 per ounce from its opening price of US$286.10/60 per ounce. Hong Kong bullion opened at $286.10/60 an ounce against New York's US$286.00/50 close on Thursday and Hong Kong's previous close of US$289.70/290.20.