• 
• 
• 

The advice is based on the assump¬tion that the economic slowdown will last at least 16 more months.

The Trinity Securities Group, a derivatives broker in gold on the Thailand Futures Exchange (TFEX), said the precious metal this year would provide better returns than stock or capital markets.

"We'd like to warn investors that gold prices, despite its rising trend, won't increase speedily like it has since 2005. This year, gold prices will like¬ly be volatile, from $900 an ounce and with a 1012percent price move¬ment. The easiest way to maintain the investment cycle is with negative news, which raises the price. But once the negative news disappears, beware of any correction," Trinity said in a paper released yesterday.

However, it said that over more than five years, gold as an investment would be more worth the risk than other investment tools. If the econo¬my is expected to recover, investors should beware of goldprice volatili¬ty, but if it is expected to be much slow¬er than expected, gold prices will rise further.

Meanwhile, gold gained in Asia as a weaker US dollar fuelled demand for it as an alternative investment and store of value.

Gold has risen 3.2 per cent in the past week, while the Dollar Index, which tracks the greenback against six major trading partners, slumped 4.2 per cent. The benchmark MSCI Asia Pacific Index added 3.2 per cent ahead of a US Treasury announce¬ment yesterday of plans to rid banks of toxic assets.

"What's holding gold up is that risk aversion moving out of the dollar into gold," Justin Smirk, senior economist at Westpac Banking, said in a Bloomberg Television interview yesterday.

Gold for immediate delivery was at $952.96 an ounce early yesterday afternoon in Singapore after rising as much as 0.7 percent earlier, extend¬ing last week's 2.4percent gain.

The dollar last traded at 1.3664 to the euro, against $1.3582 last Friday.

Twentyone of 28 traders, investors and analysts surveyed from Tokyo to Chicago, Illinois advised buying gold this week as the dollar tumbles. Five said to sell, and two were neutral.

Gold has "got the potential to test $980, $990 this week", Peter McGuire, managing director at Commodity Warrants Australia, said in a Bloomberg Television interview yesterday.

Last year, demand for gold for jew¬ellery, investment and manufactur¬ing was 58 per cent, 30 per cent, and 12 per cent, respectively. The demand for investment in gold has risen sig¬nificantly, as those same ratios were 68 per cent, 19 per cent, and 13 per cent, respectively, from 2003-07.

The recent higher investment pro¬portion for gold is due to rising volatil¬ity in gold prices in recent years.

Demand for gold for jewellery fell 11 per cent last year from 2007 but is expected to rise in the long run. India consumes the highest proportion of gold at 23 per cent of total demand each year, while China and the US each consume about 14 per cent, fol¬lowed by Turkey at 5 per cent and Saudi Arabia at 3 per cent. Trinity said in general, demand for gold for jew¬ellery rose when gold prices were sta¬ble or rising slowly but that demand for gold for investment rose signifi¬cantly when gold prices were highly volatile.

World Gold Council data show demand for gold for investment rose 64.31 per cent from 664 tonnes in 2007 to 1,091 tonnes last year. Retailers' investment in gold almost doubled in that same period, rising 87.56 per cent from 410 tonnes to 769 tonnes. The rest was investment by exchangetraded funds, which rose about 27 per cent.

Trinity said demand for gold each year was always higher than new sup¬ply. The supply of gold from new gold mines represents only 63 per cent of demand, with the rest obtained from gold sales by central banks around the world (12 per cent) and melting down old or recycled gold (25 per cent).

At present, the supply from about 400 gold mines worldwide is stable at 2,525 tonnes a year.

Since 2007, gold held by all central banks has amounted to 29,000 tonnes, or 18 per cent of the gold sup¬ply. From 2003-07, central banks worldwide sell 500 tonnes a year.

The sale of gold by central banks is controlled by the Central Bank Gold Agreement, signed by 15 of the agen¬cies. The agreement prevents too much gold being sold at once, which could make gold prices plunge. The maximum amount of gold that can be sold annually by the centralbank members is limited to 500 tonnes.

The price used to calculate final settlement prices in gold futures trad¬ing on the TFEX is the London Gold AM Fixing: gold of 1 baht weight equal to the London Gold AM Fixing price multiplied by 0.4753, then by the foreignexchange rate.