Gold demand reaches 10-year high

Gold demand reaches 10-year high
Posted: 17 February 2011 2135 hrs

SINGAPORE : The demand for gold is expected to get a further boost this year after hitting a 10-year high in 2010, according to the World Gold Council.

Prices of the yellow metal surged to a record US$1,421 an ounce in November last year on strong demand from jewellery makers and electronic-component manufacturers.

Investment demand for gold also rose.

For the first time in 21 years, central banks shifted from being gold sellers to gold buyers in 2010, removing a significant source of supply to the market which drove up prices.

Gold has become an increasingly popular asset as central banks and investors look to hedge against an anticipated rise in inflation.

Monetary easing in the US is also adding fuel to rising gold prices.

According to the World Gold Council, gold demand for the year reached a 10-year high, with annual demand of 3,812 tonnes worth approximately US$150 billion.

And while the yellow metal is largely seen as a physical investment in Asia, some analysts said that the trend might change.

Now there is the option of a more liquid from of investing, through exchange-traded funds (ETFs), which allow investors to buy or sell the commodity like shares in a company.

Albert Cheng, managing director of World Gold Council (Far East) Pte Ltd, said: "I think we see these gold ETFs getting popular in Asia. And I think investor education is key to converting them to products which is a Western phenomenon...but because of convenience, Asian investors start to get into this product category."

- CNA/ms

- wong chee tat :)