Gold glitters as stocks lose luster
By Wang Lan (China Daily)Updated: 2007-06-06 08:50
The steady increase in gold prices on the Shanghai Gold Exchange since last Thursday is widely seen as the beginning of a longer-term uptrend underscored by rising global demand and a gradual shift of capital by nervous stock investors seeking temporary refuge in the yellow metal.
Picking up on the increase in the past week, the price of Au100g on Shanghai Gold Exchange closed at 166.90 yuan per gram, up 0.90 yuan - a rise of 2 percent from last Thursday.
The opening price of most actively traded gold futures contract for delivery on February 2008 on COMEX in New York yesterday rose $1.7, or 0.24 percent, from the previous day's closing price of $695.4 per ounce.
The rebound in gold prices is seen by economists as a prelude to a sustainable new round of upward trend in gold.
"Global gold prices are expected to take on an upward trend, underlined by the market fundamentals of short supply," said Li Jingyuan, an analyst with Hai Fu Futures Co.
The domestic price of gold has got a shot in the arm from the diversion of investment funds from the battered stock market, analysts said.
Some experts said more investors are parking at least a part of their savings in gold in view of the high volatility in the stock market.
"When the stock market seems uncertain, gold is seen as an effective investment," said Tang Mingrong, an analyst with Ling Rui Gold Investment Co. "Our company has also found many individual investors who would like to divert their capital to the gold market."
The domestic market trend is largely in sync with the international market. According to the World Gold Council, global demand for gold in the first quarter of 2007 amounted to $17.4 billion, up 22 percent from the previous year. But the output in the first quarter declined 2 percent year-on-year .
In the first quarter of this year, the global supply of gold was 808 ton while the demand was 827 ton. The supply gap has increased the pressure on prices.
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The surge of copper prices yesterday is seen to have given another push to the upward trend in the international copper market.
"The imbalance between supply and demand is widely seen as the major factor behind the price rise," said Xuan Long, an analyst with Nanhua Futures Co.
The copper inventory in Shanghai Futures Exchange has decreased by 3,373 tons by this week. The stock in London Mercantile Exchange has also plunged by 6,675 tons from last week.
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