Financial Market

The price of gold passed a 28 year high of 850 dollars an ounce today following unrest in Pakistan and political turmoil in Kenya fuelled demand for the precious metal.

The current price of gold which hit $866.53 on the London Bullion Market, which although in part been contributed towards by the declining dollar which fell against the Euro again today, is as a result of demand brought on by safe haven buying.

The relationship between political unrest and an increased interest in gold is nothing new, and in troubled times gold is often seen as a safe haven for protecting investment funds from the impacts of inflation seen with stock and share investments.

Historically gold has not seen the rises of in 2007 (up 30%) since 1979, when the Iranian revolution crippled crude oil exports and US inflation hit 13%.

The rises in gold have come as record oil prices have been gradually driving up inflation, and supplies from South Africa, the world’s biggest producer, have dropped to the lowest in 84 years.

The demand for the metal has also has arisen due to heavy losses in credit markets which have spurred demand for alternatives to stocks and bonds. With the dollars drop investor interest in dollar-priced commodities is growing as they become cheaper for buyers using stronger currencies.

“Investors are worried about the oil prices and the weak dollar. When the situation is unstable, they invest their money elsewhere and this has boosted buying interest in gold” - Gary Yue, a gold dealer at Delta Asia Financial Group.

Also a factor in the rise of the price of gold, according to the World Gold Council, is the increased volume of jewellery purchases in emerging economic powerhouses China and India.

Gold is tipped to continue to increase in value over the coming months. Amongst the aforementioned reasons for the precious metals popularity, it believed many investors will continue to look at gold as a way of protecting reserve funds from acceleration inflation.