Invest on Gold, a better security

by Lalin FERNANDOPULLE

Gold merchants say there is more to the current boom of gold than just withdrawing from the weakening dollar. Unlike in the past today there is less correlation between the two assets.

A leading gold merchant in Colombo said the investments in gold has been conspicuous in the recent months following the financial crisis that lead to the erosion of investor confidence.

He said, investing in gold is a better security than relying on fancy interest rates pledged by mushrooming financial institutions. Speculations are that gold prices will surge to Rs. 36,000 a sovereign early next year with the recession yet having a ripple impact on global markets.

Gold prices recorded a steady growth since mid this year from Rs. 27,000 in July to last weeks price of Rs. 34,000 a sovereign. In January sovering was Rs. 24,400. Merchants said the removal of five percent VAT on gold in April this year resulted in more demand for the metal asset which is now turning out to be a glittering investment. A top international magazine spotlighted the asset stating that when investors are nervous about inflation, political turmoil or financial breakdown-they return to the soft, shiny metal that has for millenniums served as a store of value.

Global stock markets reported the weakened US dollar against other currencies due to the economic down turn yet keeping a hold on the US currency. The US dollar fetched Rs. 113 at the close of the market last week.

Demand for gold peaks in June and December during weddings, festivity and other occasions.