15
September
Gold Prices Hit Record Highs as Central Banks Start Buying Precious Metal (GoldCore on RTE)
15 September 2010 RTE Business
The cost of borrowing rose again yesterday with the interest rate applied to Irish Government bonds yesterday rising well above 5.9%. Ireland was not the only country to see the effects of renewed worries about sovereign debt and other euro zone countries such as Portugal also saw their cost of borrowing rise. Investors are putting more of their money into commodities - and gold in particular. The cost of gold hit $1,267 an ounce yesterday - an all time high.
Stephen Flood, a director of Goldcore, says that gold is up almost 16% in recent months and the previous metal has seen growth every year for the past ten years on the back of increased economic uncertainty worldwide. He says a raft of different investors are buying gold, ranging from institutional investors and central banks from around the world. He says that central banks are starting to favour gold because they see it as a stable form of currency. In the past they had not been interested in it as it did not pay a yield and so was not as 'interesting' as the like of US bonds. But with the economic climate the way it is, they are starting to change their minds, Mr Flood explains.
Mr Flood says no-one really knows when the gold rally will end, but says that perhaps that query could be rephrased as when will the risks start to abate? He describes the current situation as a 'gigantic poker game' and says that gold is so valuable because there is a fixed amount of the metal. He points out that all of the gold in the world could fit into a 20 metre high cube.
Investors are also becoming more interested in other commodities such as silver, and Mr Flood says that silver always rides on the back of gold's coat-tails. But he points out that it remains more volatile. In future days, Mr Flood says that commodity traders will look at the intervention of the Bank of Japan in an effort to halt the strength of the yen and also at what the US Federal Reserve is planning for the American economy.
