Gold may hit $2,000 amid dollar woes: Economist

The price of gold may hit US$2,000 per ounce in the next few months if the global economic woes triggered by the US and Europe debt crises continue to escalate, an economist said Tuesday.

Bank International Indonesia chief economist Juniman said the surging gold price, which raced past $1,700 per ounce on global markets for the first time in history on Monday, was a result of Asian central banks stocking up in gold to find safety, as the US dollars weakened on the dimming US economic outlook.

“Nearly all central banks in Asia are now diversifying and have started to buy gold. And now private investors are eying gold, too, as prices of all other commodities, such as oil and coal, are tumbling down.

“I reckon that the gold price will touch $1,800 in the near future, in the blink of an eye; and even reach $2,000 by the end of the year, if the situation gets worse,” Juniman said in a phone interview with The Jakarta Post.

Local gold producer PT Aneka Tambang (Antam) said on its website on Tuesday that local gold bar prices had topped Rp 530,000 ($ 62.2) per gram, or $1,763 per ounce; up almost 12 percent from Rp 473,000 a month ago.

Last year, gold bar prices increased by around 14 percent from Rp 350,000 to Rp 400,000.

Standard Chartered Bank Indonesia senior economist Fauzi Ichsan similarly said that investors were now diversifying to gold and Swiss francs as their trust in US dollars weakened.

“Investors now consider gold and Swiss francs as ‘safe havens’. As long as the global financial crisis continues, the upward pressures on gold will continue on.

“But, when the [global financial] situation has become stable again, the gold prices will be corrected; they will be down,” Fauzi said.

Rama (not real name), a private employee in Jakarta who has been investing in gold over the past few years, said he was planning to start buying gold bars again as soon as he managed to secure some funds.

“Unfortunately I sold my gold before the prices started to go up; due to a family need. So I can’t enjoy this gain,” he told the Post.

But, Adi (not real name), 29, a Jakarta-based writer with an interest in gold investment, said the surging prices had discouraged him from buying the precious metal.

“There’s no way I would buy gold at times like this. It would cause me losses instead. I should have bought it two months ago.”

Meanwhile, Bloomberg reported from London that gold advanced to records in London and New York as the global rout in equities and commodities deepened on concern the economic slowdown will worsen after Standard & Poor’s cut the US credit rating.

Bullion surged 24 percent this year, heading for an 11th year of gains, as the sovereign-debt crisis and a faltering economy boosted demand for the metal as a protection of wealth. Holdings in exchange-traded products backed by gold surged 1.4 percent to a record 2,216.8 tons by Monday, data compiled by Bloomberg showed, an 11th straight day of gains.

Gold for immediate-delivery rose $47.57, or 2.8 percent, to $1,767.10 an ounce at 10:33 a.m. in London after gaining as much as 3.5 percent to an all-time high of $1,780.10, making the metal costlier than platinum for the first time since 2008. The price yesterday jumped 3.4 percent, the biggest daily advance since January 2009. Gold futures for December delivery in New York advanced $54.20, or 3.2 percent, to $1,767.40 an ounce after earlier surging as much as 4 percent to a record $1,782.50 an ounce.

S&P cut the long-term U.S. rating one level to AA+ from AAA on Aug. 5. The agency described the outlook as “negative” and criticized the nation’s political system for failing to adequately address deficit reduction.