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Published on January 16, 2008

President Jitti Tangsithpakdi said gold prices in Thailand had risen 30 per cent from the same period last year. High gold prices have pushed investors to rush to sell gold for profit, while there are fewer gold buyers at the moment.

"The condition of the gold business in Thailand nowadays is very sluggish compared with the same period last year. It will be get worse if the global gold price climbs to $1,000 (Bt33,140) an ounce as expected. This business will be in trouble and goldsmiths will be the most affected," he said.

Gold entrepreneurs have a way out from this situation, Jitti said. They can sell gold in the global market and bring money back to the business.

The price of gold is hitting record new highs owing to the troubled US economy and a cocktail of other supporting factors, leading some analysts to predict a price of $1,000 per ounce could happen soon.

In recent days, the precious metal has blasted past $900 in a record-breaking run, according to Agence France Presse.

Unprecedented demand for jewellery production in China and India, the weak US dollar, rising inflation due to high oil prices and fraught geopolitical concerns have sparked demand for precious metals, particularly gold.

On the London Bullion Market on Monday, gold blazed a trail as high as $914.30 per ounce. On Friday, gold had broken through $900 for the first time during New York trade.

"Psychologically, $1,000 per ounce now has to be a target," said John Payne, portfolio manager of Hexam Global Resources Absolute Return Fund.

"I think the primary driver is concern over the US economy and the weak dollar. Food-price inflation, geopolitical concerns and oil near $100 per barrel are all drivers of the price," added Payne.

The weak US currency makes commodities priced in dollars - like gold and crude oil - cheaper for buyers using stronger currencies and therefore encourages demand. Traders are also investing their cash in gold as they search for shelter from concerns over the troubled US economy. In addition, the metal benefits from its safe-haven status in times of geopolitical uncertainty.

Also, with oil prices trading above $90 per barrel, more investors are turning to gold as they seek to guard against rising inflation sparked by the soaring cost of crude in many countries.

Nik Bienkowski, head of listings and research at ETF Securities, agreed that gold prices were on track to score new record highs.

However UBS analyst Robin Bhar sounded a cautious note.

"We are more concerned about the prospects for a sharp correction in all the precious metals rather than for near-term gains," Bhar said.

Nalin Viboonchart

The Nation