Commodity Online
NEW DELHI: Even as the gold prices soar and investors across the globe run after the yellow metal, some Gulf countries are witnessing a strange phenomenon that sale of gold is falling like never before.
According to reports from Jeddah, sales of gold have been dropping over the last few weeks as, it seems, Saudi consumers have dropped gold from their shopping lists for the moment.
In fact, in a bid to attract buyers, many gold dealers have launched promotional schemes. They are offering discount sales of between 40 and 60 per cent off on some gold items because sales have slowed since prices began to steadily rise early last month.
By offering the sales promotions jewellers are trying to convince the shoppers that the discounts will make up for the recent price increases. Meanwhile, rising gold prices have given a boost to the sale of costume jewelry.
However, gold prices have again gone up above $900 an ounce since October after hitting an all time high of $1,030.80 an ounce almost a year ago.
The latest reports show the prices are hovering around the $900 level and have dropped only slightly at the end of yesterday’s trading to $894.38.
But while gold prices have been fluctuating and tending upward, analysts say we may have yet to see the peak in gold prices considering the global economic downturn.
Investment bank Goldman Sachs raised its forecast recently for the price of gold to push past $1,000 an ounce over the next few months based on investor concerns and rising demand as a dependable means of investment.
The gold price rally has been driven by surging demand for gold (on a global-scale) in all forms: Physical gold exchange-traded funds (ETFs) and futures contracts as investors seek a safe store of value amid the financial distress and inflation risks.
It confirmed that strong relationship between the US dollar and gold prices and the exchange rate of the dollar against other currencies has begun to deteriorate.
In addition, Merrill Lynch revealed last month that some of its most prominent clients are so concerned about the current financial climate and signs of potential instability around the world that they have been insisting on purchasing gold bars, shunning derivatives or paper currencies.
The firm also predicted that gold would soon surpass its all-time record and would hit $1,150 by June and argued that gold would be the best investment option at this time as the deflation sets in and further rocks the economic system.
Gold would serve as a safe haven but if massive monetary stimulus gains momentum offsetting inflationary prices again it will also come into its own as a store of value.
