Thursday, March 13, 2008

Gold King Again

Gold passes $1,000 an ounce for the first time, and it is widely expected to shoot even higher in the near future.
By roatha007 with references to the Economist articles

The recent gold's rise, in one sense, is part of a surge in commodity prices that has seen oil break above $100 a barrel, and wheat reach a record high on supply shortages and rising demand from the world's meat-eating middle classes. It may sound circular, but inflationary fears are one of the reasons gold prices are rising.

The trend has been seen as vindication by those who believe that gold is the only real store of value and that paper money is doomed to decline to its intrinsic worth, zero. Indeed, one of the main reasons why gold is priced in four digits is related to the problems of the dollar. The greenback dropped below 100 yen on Thursday, its lowest level since 1995.

Gold acted as a safe haven in the sense that it did tend to rise when stock markets fell sharply, but this characteristic lasted for only 15 days. So if you were worried about a sudden collapse in the stock market, buying gold could have acted as an insurance policy, but only if you were quick on your feet.

The unprecedented hike enables gold holders make a good fortune. Gold has proved to be a best alternative investment when dollar depreciates; it tends to appreciate when the US or the world economy is in trouble. It is perceived to be a useful anti-inflation and declining-dollar hedge. The very-long-term record of gold has been pretty good relative to most currencies. High demand in emerging economies and speculation also play a vital role.

In Cambodia coupled with the global trend, the surge may due to oversupply of dollar through the influx of foreign capital, tourist dollar and under-the-pillow money, mainly the corrupt one. Those, esp low-income people, making a fortune from selling land flock to buy gold whether for ornament or as deposit, as they think it is safer than keeping dollar at home: The mentality in many cash-based poor economies, where people do not prefer using banks. The soaring demand for gold in Cambodia during price hike is somehow unusual(?). Though, the trend may not last long when there is no windfall from real estate boom any more (if there is no external shock). Here are other related articles:
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