Gold prices touch all-time high - Rs 20,200 per tola

Gold prices touch all-time high
eKantipur.com, 3-Jan-08

Spurred by a hike in oil prices and the weak dollar, gold rose to a record high of Rs 17,320 per 10 grams (Rs 20,200 a tola) in the local bullion market Thursday. The price was Rs 17,105 per 10 grams on Wednesday.

Market analysts and traders said that as global investors had been buying gold as a hedge against accelerating inflation and the falling dollar, prices had moved up in the international market. The local price of the precious metal is based on international trends.

A weaker dollar makes gold cheaper for holders of other currencies, causing the demand for bullion to go up. The metal is also generally seen as a protection against oil-led inflation. “The main reason for the increase is that oil prices have broken through the 100-dollar mark. This and the weakening dollar have driven up gold prices,” said Tej Ratna Shakya, president of the Nepal Gold and Silver Dealers Association. He said these factors have fueled demand for the precious metal in the global bullion market.

World prices of the yellow metal increased to US$ 868 an ounce, smashing the 28-year-old record of US$ 850. This previous record was set in 1980 when investors rushed to buy gold because of a high inflation rate sparked by soaring oil prices amid the Iranian revolution.

Shakya said that with the dollar outlook remaining weak and further US interest rate cuts in store, gold could rise further.

The surge in the price of gold has driven away local buyers. “The demand for gold in the local bullion market has dropped by over 75 percent because of the increase in its price,” said Shakya. “Nepalis buy gold to make jewelry. The concept of purchasing gold as an investment has not developed here.”