Demand for Gold Soars

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Gold sales in foreign exchange and coin stores Lisbon almost doubled this year, draining inventories faster than they can restock, said Rui Lola, who manages coin sales at the shop near the Rua do Ouro, once a center for goldsmiths working with metal brought back fromBrazilin the 18th and 19th centuries.

He sold 643 ounces of coins in the first six months this year.

Whats happening at the Mundial Agencia de Cambios in the historic center of Lisbon underscores the Global rush from investors seeking refuge from debt and banking crises.

Holdings in exchange-traded products backed by Gold reached a record US$113billion July 29 the data show.

Rand Refinery Ltd., operating the Worlds biggest refining complex east of Johannesburg, is selling the most Krugerrands in almost a year.

Purchases accelerated as Greece was bailed out for a second time, US leaders wrangled over borrowing limits and the cost of insuring against bank defaults hit a six-month high.

While George Soros sold most of his Gold in Q-1, a year after calling it the ultimate asset bubble, John Paulson, who made US$15B betting against sub-prime mortgages, remains the biggest investor in the largest ETP backed by Bullion.

Rally to continue

Gold advanced 15 percent this year, beating the 7.4 percent gain in the Standard & Poors GSCI gauge of 24 commodities and the 0.8 percent rise in the MSCI All-Country World Index of stocks. Treasuries returned 4.2 percent, a Bank of America Merrill Lynch index shows. The metal for immediate delivery traded at $1,629.20 an ounce by 4:43 p.m. in London.

Bullion, which reached a record $1,632.80 on July 29, will rise as high as $1,713 this year and $1,938 in 2012, according to the median in a survey of the four most-accurate precious- metals forecasters tracked by Bloomberg over the past two years. That may mean 12 consecutive annual gains, the longest winning streak since at least 1920.

Investors in options on Comex gold futures also expect the rally to continue. The most widely held option gives holders the right to buy gold at $2,000 by November, 22 percent more than now. The second-biggest position is $1,800 for the same month, data from the exchange shows. It was the most widely held option as of July 29. Speculators are holding close to their largest bet on higher prices since October 2009, according to figures from the U.S. Commodity Futures Trading Commission.

Rand Refinery sold about 66,400 ounces of Krugerrands last month, the most since August 2010.

Investors added 142 tons of gold to their holdings through exchange-traded products since the end of February, taking the total to 2,152 tons, data compiled by Bloomberg show. Thats more than all except four central banks.

“Since the dawn of recorded history, gold has been a parking place, a store of wealth, and thats never changed, saidMichael Pento, the economist at Euro Pacific Capital Inc. inNew Yorkwho correctly predicted the collapse in commodity prices in 2008. Gold is more and more an essential part of investors portfolios.

The Sydney Morning Heraldreportsgold is capable of notching $2,000 per troy ounce by the end of this year. Or the precious metal might surpass that amount next year as driven by the debt crises, according to the publication.

The Mideast market

The Middle Eastern market, which has seen sustained interest in large denomination bullion bars from high-net-worth individuals, has a new ally, as expats are fast becoming an important consumer segment.

Traders believe that Indian consumers helped boost sales in gold bars and coins in the Middle East, which has seen 10% growth in bars and coins in Q111, as against a 16% slump in gold jewelry sales during the same period.

Saudi Arabia has also seen 6% rise in demand for bars and coin, even as jewelry demand has fallen by 19%. UAE, on the other hand, registered 21% growth in investment in bars and coins, while jewelry demand grew by 5%, according to a report by the World Gold Council.

Gold has been the favoured safe haven throughout history. It has also long been recognized as a good store of value and a hedge against inflation.

Precious metals are becoming more attractive due to the weakness of the American economy; rather than making purchases which rely on the health of the dollar, investors are moving to goods of intrinsic value such as precious metals. These metal assets will serve investors as stores of value, hedges against inflation, and a form of wealth that is easily liquidated to become almost any form of currency desired.

Sources: livetradingnews, Bloomberg, danielstrading, smh, theaureport

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