Gold rally continues despite Dubai worries
By Salman Ansari Javid

TEHRAN - After Dubai World attempted to reschedule some $59 billion of liabilities, the value of Asian and European stock market shares fell and also gold slumped as much as 4.2 percent on Nov. 27 as the news rattled investors.

Dubai World is an investment company that manages and supervises a portfolio of businesses and projects for the Dubai government and is also known as Dubai’s investment arm.

Gold has been steadily rising since the beginning of November when India purchased 200 metric tons of gold from the IMF. The yellow metal, up 34 percent this year, traded for a record high of $1,195.10 an ounce (31.1034768 grams) on Nov. 25, with speculations that it might cross the psychological benchmark of $1,200. However by Monday, Nov. 30 gold fell $11.50, or one percent, to $1,166.13.

The weakness of the fluctuating U.S. dollar, which is still the main global currency, coupled with the near zero U.S. interest rates, encouraged investors to opt for the safety of the bullion market. In order to buy the 200 metric tons of gold, India had to swap the greenback for the bullion, pushing the two in opposite directions.

Business analysts think that the move by the central banks to increase their gold holdings will continue to support the price of the metal.

Last week Sri Lanka bought 10 tons of gold from IMF, following India’s 200 ton buy and a two ton purchase by Mauritius. According to Wall Street Journal the IMF has 191.3 tons of gold left to sell.

Another reason for the gold’s rally is the dent in the public confidence, doubts if the global economy is in the path of recovery from last year’s financial meltdown. Following the announcement of bankruptcies by major financial institutions, the public trust for stock market shares, financial institutions and the greenback has eroded, pushing investors to the safety of gold.

As the price of gold in Iran rallied faster than the global price, the Central Bank of Iran injected five million Bahar Azadi gold coins into the market through Kargoshai, Sepah and Tejarat banks two weeks ago. The measure by CBI temporarily brought down the price of gold, only to see the price of gold rally and set new record highs.

The Farsi daily, Tehran Emrooz reported the 9 carrot Bahar Azadi, weighing 8.13 grams, traded for 273,000 tomans and the U.S. dollar traded at 992 tomans on Nov. 16.

By Monday, Nov. 30, Bahar Azadi reached 280,000 tomans and the U.S. dollar was traded for 998 tomans.

Gold bourse

In order to facilitate the sale of gold coins the authorities announced extended bank hours and the establishment of a gold bourse.

The Securities and Exchange Commission of Iran President, Ali Salehabadi, announced last week: “We have reached an agreement with the Central Bank to open a gold market in Iran’s commodities bourse and offer gold coins, currently offered by Kargoshaei Bank, at this market.”

The high price of gold is a sign of economically unstable times during which business transactions and real estate sales come to a standstill as buyers wait for further plunge in real estate prices and sellers hope for the prices to rise again and few transactions take place. According to Bloomberg gold is set for a ninth annual gain as central banks, pension funds and individual investors buy precious metals as a hedge against declines in the dollar and possible inflation.

Among other precious metals for immediate delivery, silver fell 0.9 percent to $18.1325 an ounce, platinum declined 0.1 percent to $1,439.40 an ounce and palladium dropped 0.7 percent to $362.25 an ounce.

Photo: Traders are betting that gold will hit $1,200 an ounce or higher early next year. (Photo/Reuters)

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