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Wed 16 Apr 2008 06:08 PM

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Gold tipped to hit fresh all-time high

Demand in both retail and investment form will continue to grow, pushing price higher, DMCC exec says.

Demand for gold in both retail and investment form will continue to rise this year, pushing prices even higher, a senior executive at Dubai Multi Commodity Centre (DMCC) has told

Gold, the historical hedge against the world’s paper currencies - particularly the US dollar, reached a nominal record of $1,033 in March, prompting concern from some retailers that the high price would scare off buyers.

However, Ian McDonald, executive director for gold and precious metals at DMCC, said prices have had little impact on demand and forecasted that gold would continue to move higher, although he declined to speculate on exactly how high it could go.

“I would not be surprised if demand in 2008 reaches an all-time record,” McDonald said in an interview. "That’s why the price is staying up.”

When asked how the soaring price of gold has affected the UAE market overall, McDonald replied, “It hasn’t so far, that’s the thing. Basically imports were up 14% year-over-year.”

In 2007, gold sales for jewellery and investment in the UAE rose almost 12% in volume and 20% in value compared to the year, according to the World Gold Council.

The higher price, however, did weigh on jewellery sales in the fourth quarter of 2007, deterring buyers and depressing the value of sales by 30%, according to industry observers.

McDonald said he sees these dips as temporary.

“Gold will continue to go up,” he predicted, citing the inflow of “smart money” as a driving force, but warned that “it won’t necessarily do so in a straight line”.

The $1,000 benchmark will be another psychological barrier that both investors and retailers will have to get used to, McDonald said.

“I remember people telling me that if gold ever went through $500 there would be no more demand for jewellery, and here we are at $1,000,” he said.

After its March 21 peak, gold suffered the worst single-week selloff in over 25-years when it plummeted to around $900.

“Since the price has pulled back everyone has told us the retail trade has picked up again.” he said, referring to temporary demand drop-offs when the price escalated rapidly.

The precious metal has since rallied on the back of poor economic data from the US and returning demand to trade at around $930 per ounce.

McDonald said he expects any short-term drop in demand on the retail side to be offset by an increase from investors looking to hedge against “nonsense” monetary policies from governments, particularly that of the US.

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