The price of gold leaped to a record high Monday at $1,173.50 per ounce, up 1.9 percent from the close of business on Friday. The price of gold exactly a year ago was $815 per ounce.
Financial buyers now comprise almost a third of the investors in the commodity, according to The Guardian; prior to the world economic crisis, they represented less than 10 percent of the market. Jewelers still comprise half of the buyers, with industrial consumers making up the rest.
The expectation that the interest rate in the United States would remain in the basement has caused massive pressure on the American dollar, hence the higher attraction to the dollar and oil products on the international market.
There was also a corresponding rise in the price of oil -- an increase of more than $2 per barrel of U.S. light crude in the middle of the trading day Monday. Closing oil prices at the end of the day stood at $77.56 per barrel, a slight rise of nine cents per barrel.
The BBC reported a rising demand for gold in emerging markets, particularly in Asia, which has also contributed to a rise in the rate. Governments of countries that are defined as emerging markets are trying to diversify their portfolios in foreign currency, and so are buying gold.
Analysts estimate the price of gold will continue to rise. "It looks like we will see a price of $1,200 per ounce much sooner than expected," commented gold bullion refiner MKS Finance's Afshin Nabavi.
Steady Increase in Price
The price of gold this year has averaged approximately $950 per ounce, according to M.R. Raghu, Senior Vice President of Research at the Kuwait Financial Center, who predicted a further rise. Raghu told Emirates Business he expects to see the price of gold "swing between $1,300 and $1,000 for the next year."
But he said the rise in prices did not necessarily reflect a better outlook in terms of economic recovery: "The sharp rise in gold indicates the cloudy global status in terms of pulling out of the recession," Raghu said.
The head of the treasury at a Dubai-based bank who preferred to remain unnamed commented in Emirates Business that Middle Eastern investors are predicting the U.S. dollar will drop further, prompting an increased demand for gold.
"Investors should look at gold and dollar as two competitors on a see-saw," he said. "If you expect the dollar to go down further -- and who doesn't -- then go for the gold," he advised.