More Investors Show Interest in Gold

Gold bar

Gold rose above $1,120 per ounce to hit a record high  yesterday for the second straight day as investors focused on the appeal of the precious metal as a hedge against a weakening dollar.

Improvements in the economic outlook also lent support to the precious metal.

Gold is often seen as a hedge against energy price-led inflation.

U.S gold futures for December delivery traded at $1,120.30 per ounce, up 0.5 percent.

The contract earlier rose to a fresh record of $1,122.20.

Dick Poon, Manager of Precious Metals at Heraeus in Hong Kong, said there was some improvement in the demand from the industrial sector but “a key driver for gold's extended gains was a broad-based fall in the dollar.”

“Fund managers are changing their portfolios and so are our customers with the Euro and other Asian currencies getting stronger,” Poon noted, adding that gold would likely reach its next target of $1 200 by the end of this year.

The Australian dollar hit a 15-month high against the U.S dollar on Thursday after a better than expected employment report led investors to believe a further increase in interest rates was almost certain by next month.

Risk tolerance was increasing among investors after strong factory output data from China pointed to a recovery of the global economy, boosting commodities, stock prices and providing more support to the precious metal.

“The Euro clawed back above $1.500 and oil steadied near $80 a barrel. Japanese stocks are extending their gains but everything looks good for gold,” said Shuji Sugata, a Manager at Mitsubishi Corp Futures' research team.

On Wednesday, the central bank of Vietnam said it would allow the importation of gold, which was banned in May last year after the sharp rise in bullion prices opened up a new source of demand.

“But the lack of foreign currency in Vietnam means that demand for the precious metal would not be enough to have an impact on the market as a whole,” said Kaname Gokon, Deputy General Manager at Okato Shoji.

Additionally, gold has been underpinned by more central banks after news last week that the International Monetary Fund had sold 200 tonnes of bullion to India's central bank.

On the supply side, Barrick Gold Corporation, the world's biggest gold producer, told Reuters that it sees the potential for record margins in the fourth quarter as gold prices hit new peaks.

Reuters