With risk aversion remaining the dominant emotion among investors, gold hit a two-month high of $1,251.48 an ounce, the highest level since 28 June.
Gold holdings through ten exchange-traded products (ETPs) tracked by Bloomberg rose to 2,079.48 metric tonnes, beating the 19 July record of 2,078.05 tonnes. 278 tonnes of gold have been accumulated by ETPs so far in 2010, and the figure of 2,078.05 tonnes is almost double the official reserves of Switzerland. Gold’s status as the ultimate safe-haven asset appears to be the main driver behind recent increases, as uncertainty about the global economy continues to worry markets. Peter Hambro, chairman of gold miner Petropavlovsk, commented this week in an interview with Bloomberg that the chances of gold prices rising about $1,500 an ounce were ‘very real’, and a Bloomberg survey of traders and investors backed Hambro’s view. Buying of physical gold by countries continued, with Russia adding 16.2 tonnes to its holdings according to data from the IMF. Gold prices did stumble on Wednesday after US and Chinese manufacturing improved by more than predicted which sparked a sharp rally in equities that alleviated risk aversion at least momentarily. However, gold resumed its slow upward trend on Thursday. If the Bank of Japan takes concrete steps to weaken the yen versus the US dollar, then the gold price may see further increases as investors exit declining currencies and increase purchases of gold, both in its physical form and via ETPs.
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