Dubai: Gold futures surged to another record of $1,458.70 an ounce Wednesday with analysts predicting demand for the precious metal could soar further in the months ahead.
Silver also strengthened to a new 31-year high of $39.54 as investors continue to seek traditional safe havens due to a weakening US dollar, escalating geopolitical tensions and sovereign debt worries in the Eurozone.
Gold futures for June delivery hit a high of 1,460.10 on the Comex in New York. Spot gold rose to a new record of $1,460.92.
"The price of gold is mainly being driven by a weak US dollar against other currencies and the continuing political unrest in the Middle East," said Sajith Kumar, Chief Executive and Director of JRG International Brokerage at Dubai Multi Commodities Centre (DMCC).
Kumar says there is a possibility that gold prices could reach levels of $1,800 an ounce later this year.
Upward trend
"We are seeing a sideways to upwards trend in gold prices this year, which means systematic investment is the best option for fund managers looking to trade in a secure environment," he said.
"Many fund managers view gold as a safe haven compared to equity markets, which remain largely volatile as we enter the new financial year. It is a good time to buy gold but investors have to consider the fluctuations of the market. Some correction could happen if fund managers decide to diversify their portfolios or if the US dollar begins to strengthen," he added.
The price of gold has soared in the last few years, dipping only during the financial crisis. It has gained more than five per cent since the middle of March.
Local businesses in the UAE are beginning to suffer as a result with some retailers already reporting a fall in year-on-year profits.
"Business is down between 10 and 15 per cent year-to-date compared to the same period [January to April] in 2010," said Joy Alukkas, Chairman of Joyalukkas Group, a network of jewellery shops across India and the Gulf.
"Senior figures within the industry are saying they expect the price of all metals, particularly gold and silver, to go up further in the months ahead. There is no doubt that gold is expensive — it has been rising for years — and I do not believe the situation is going to get better anytime soon," he added.
Unrest across the Arab world and unease over the Eurozone's debt finances have encouraged inflows of cash into gold, which has risen by more than two per cent this week.
