Business | Markets
Former head of gold council sees high prices for metal
The price of gold will remain high, but the precious metal will continue trading between $855 and $950 an ounce in the long term, an expert said on Sunday.
- By Cleofe Maceda, Staff Reporter
- Published: 00:08 July 14, 2008
Dubai: The price of gold will remain high, but the precious metal will continue trading between $855 and $950 an ounce in the long term, an expert said on Sunday.
According to Rolf Schneebeli, former head of the World Gold Council (WGC), gold prices are driven by expectations for a further decline of the US dollar and rising commodity prices.
These factors, however, will only have a short-term effect, as the central banks and governments are expected to intervene, to prevent the economy from sliding further. "In the short term, it seems difficult to see a dramatically lower US dollar or higher oil prices, as both would negatively influence the global economy which is already trembling because of the subprime crisis," Schneebeli told Gulf News.
"Therefore, while for the longer term I see higher gold prices based on higher inflation in the future, one can make a very good case for continued trading in the range of $855 to $950," Schneebeli added.
Record levels
International gold price briefly touched record levels above $1,000 an ounce in March. After reaching the milestone, the precious metal retraced to $855 per ounce. "It has been testing this bottom a few times now and it seems to hold quite nicely. Currently, it tries to break out on the upside of the current $855 to $950 range," Schneebeli said.
Due to high prices, Schneebeli said the physical demand for gold jewellery in the UAE has dropped in tonnage terms, but the country's strong economy is keeping sales volume at high levels.
"The physical demand has been reduced substantially by the high prices earlier in the year in tonnage terms, whereas in currency terms, there was still an increase," Schneebeli said.
This was confirmed by a recent WGC report, which said that the sharp rise in gold prices was a key determinant of movements in gold demand in the UAE during the first quarter. Despite high prices, gold sales in the UAE increased by 15 per cent, from Dh2.7 billion in the first quarter of 2007 to Dh3.1 billion in the same period this year.
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