, Gold and Silver News: Gold at new record high after Saudi reserves double

Monday, June 21, 2010

Gold at new record high after Saudi reserves double

Gold prices hit on Monday a fresh record high of almost $1,265 a troy ounce following the revelation that Saudi Arabia, the world’s largest oil exporter, is sitting on more than twice as much gold as previously thought, according to new estimates.

The disclosure points to the revival of bullion as part of emerging economies’ official reserves and comes as investors pour money into the yellow metal.

The weakness of the dollar following China’s decision to make the yuan more flexible, gave bullion further momentum, analysts said. A stronger yuan makes the cost of gold for Chinese buyer cheaper, potentially increasing demand. China is the world’s second largest gold consumer, after India. It is also the largest producer.

In early trade in London, spot gold surged to $1,264.9 an ounce, up 0.7 per cent from Friday’s last quote in New York. It later pared gains to trade at $1,258. Adjusted for inflation, however, bullion is still below its all-time high of more than $2,300 set in 1980.

Traders and bankers said hedge funds remain extremely bullish on gold because they believe that, sooner or later, the central bank’s recent massive monetary expansion would translate into inflation. Some hedge funds have internal forecasts above $1,300-$1,500 for the end of the year, bankers said.