The price of gold has touched an all-time high for a third consecutive day – after a continued decline in the dollar kept it attractive to investors.

Gold reached $1,058 an ounce, powering past Wednesday’s high of
$1,048.4. On Tuesday it passed the $1,033.9 an ounce record set in
March last year.

Analysts said that there was still potential for prices to rise further if the dollar remained weak.

However, there was caution that it may represent a price bubble.

Speculative bubble?

“Investors are turning towards gold as a hedge in dollar weakness,”
said Adrian Koh, an analyst at Phillip Futures in Singapore.

Some argue that the possibility of higher inflation in the US as its
economy recovers is another factor in lowering the price of the dollar,
further boosting the appeal of gold.

But others say the demand is driven purely by speculation, especially
form institutional investors such as hedge funds looking for
opportunities to make money in a climate where more traditional means
of savings are offering low returns.

The price of gold is typically strong in the October to December period
because of the higher demand for jewellery in the run-up to Christmas
and the Indian festival of Diwali.

Demand for gold is strong in India, and Indian communities around the
world, ahead of the festival of lights, which this year falls on 17
October.

This is because gold jewellery is typically given as presents – though
some reports suggest that spending has been cut back this year because
of the financial slowdown.

Source: BBC

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