Investors find ‘safe haven’ in precious metal
By CHOONG EN HAN (The Star)
KUALA LUMPUR: The price of gold may surge further following Standard & Poor's (S&P) downgrade on US credit ratings as investors look for a “safe haven” in the precious metal.
The price of gold climbed above US$1,700 an ounce yesterday following the downgrade of long-term US credit rating.
“The unprecedented S&P downgrade sent shock waves over global equities and commodities markets, driving gold prices to record highs as investors sought the bullion as a safe haven,” said Phillip Futures Pte Ltd analyst Ong Yi Ling.
The next key focus would be on the Federal Open Market Committee meeting scheduled for today. Investors are looking for indications from the Federal Reserve's policy setting committee on its next course of action.
“We expect the Fed to continue its low interest rates, but the wild card would be hints of possible future quantitative easing measures which would benefit gold prices,” said Ong.
Singapore-based Phillip Futures also raised its year-end target of gold to US$1,800 an ounce, with anticipated slower US economic growth coupled with Europe's sovereign debt problems.
“Gold price has gone up by 14% since July, and the market may claw back some of its gains in the near term as the sudden surge in price may just be a knee jerk reaction towards recent developments,” Ong said.
Meanwhile, a Singapore-based head of bullion said gold price might still have some upside amid global economic uncertainties, with the price for the precious metal likely to hover around US$1,800 an ounce by year-end.
“Market talk is that prices may hit US$2,000 by year-end, but personally I would not be so bullish, as we are currently at the crossroads; if the economy starts to shrink, gold prices would follow suit,” he said.
