Gold gained to a record for a third day driven by mounting concern that currencies including the dollar will lose value after governments boosted spending to combat the global recession, fueling demand for the metal.
The price will probably top US$2,000 an ounce in the next decade, according to investor Jim Rogers. Bullion, which touched a high of US$1,054.68 an ounce yesterday, is heading for a ninth annual gain as the Dollar Index, a six-currency gauge of the dollar’s value, has shed 6.5 percent this year.
“People are printing money, gold is going up,” Rogers said in an interview on Bloomberg Television, adding that he may increase his holdings.
“There are plenty of reasons to buy gold when the time is right,” Rogers said.
Gold for immediate delivery, which traded at US$1,053.68 an ounce at 1:25pm in Singapore, has risen 16 percent over the past year. Gold for December delivery in New York gained as much as 1.1 percent to US$1,055.50 an ounce, also a record.
“It has moved higher on this safe-haven buying, a lot of it seems to do with fund activity, but there is definitely downside possibilities to gold ahead,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd.
US President Barack Obama has increased US marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. That’s boosted speculation the increased money supply will debase the currency and spur inflation. The printing of money and “abandonment of the dollar have taken the smart people over to precious metals,” according to Philip Gotthelf, president of Equidex Brokerage Group Inc.
Surging gold prices are a signal that investors are buying metals to hedge against declining currencies, according to former Federal Reserve chairman Alan Greenspan. The gains for commodities demonstrate a “move away from paper currencies,” Greenspan said last month.
To be sure, gold’s allure may decline as investors’ appetite for risk rises, said Westmore, the economist at National Australia Bank. The metal may also drop as there may not be “too much more downside” for the dollar, while inflation may not be a “big issue,” he said.
Among other precious metals, silver jumped to a 14-month high of US$17.89 an ounce, platinum rose 0.9 percent to US$1,339.25 an ounce and palladium added 0.6 percent to US$314.75 an ounce.
Indian jewelry buying trickled in ahead of the key festival of Diwali on Oct. 19, though the recent price rally is deterring some buyers. Jewelry demand in the country, the largest consumer of gold last year, has been weak this year.
“The dollar just continues to weaken and that’s the main driver of gold,” Citigroup analyst David Thurtell said.
“I’d be surprised if we didn’t see a fair bit of scrap coming out of the woodwork, and the indications are that Indian demand will be very poor at these high prices. But it seems there are enough investors who are happy to buy it to more than offset that,” he said.
He said the precious metal could rally as high as US$1,200 an ounce before the market saw a significant correction.
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