Gold breaks US$700 an ounce

Source: http://thestar.com.my/news/story.asp?file=/2006/5/11/nation/14213381&sec=nation

Thursday May 11, 2006

Gold breaks US$700 an ounce

By IZATUN SHARI

PETALING JAYA: The price of gold is defying gravity, breaking the US$700 (RM2,520) an ounce mark. This is the highest the price has moved up to since the 1980s.

The spot price of gold was US$698.25 (RM2,513) an ounce on Tuesday night, which was a US$19.75 (RM71) jump on the previous days close of US$678.50 (RM2,442) an ounce.

The price surge was caused by increasing global tension driven by weakness in the dollar, escalating oil prices, upward momentum in the commodities market and declining supply.

Local manufacturers are worried over the rising price as businesses have dropped by between 40% and 50% for the past three to four months, Malaysian Indian Goldsmiths and Jewellers Association adviser N P Ramon said.

The price of gold is increasing daily and is already affecting business, he said when contacted yesterday.

Ramon said local manufacturers were already reducing production by 50% because wholesalers could not afford to buy the prized metal.

For instance, a manufacturer who produces 100kg of gold a month has reduced capacity to 50kg because the price which was RM35,000 or RM40,000 per kg has now gone far beyond that.

Manufacturers cant afford to buy gold because it is so costly, he said.

On Tuesday, Ramon said the wholesale price for 37.8g (or one tael) - the usual weight used by retailers was RM 3,015 but yesterday, it jumped to RM3,070.

He said manufacturers did not expect the sudden price increase and had only anticipated the price to hit US$650 (RM2,340) per ounce.

At the rate it is going, we anticipate that it can go up to US$1,000 (RM3,660) an ounce within a month or two, he said.

He added that nothing could be done to rectify the situation and manufacturers would just have to wait and see.

Currently, he said there were at least 500 local manufacturers nationwide.

Habib Jewels Sdn Bhd managing director Meer Habib said: These are exciting times although many in our industry view this as a challenge. We have always been very bullish on gold.

As far as we are concerned, this is the right time for people to invest in gold, he said.

He said his company tried to manage the price increase with customer-driven initiatives, such as an exchange campaign where clients could trade-in their old jewellery.

Wah Chan Consolidated Sdn Bhd marketing communications manager Joyce Tan said so far, the rising price of gold had not affected business.

This is good news for gold producers to have their mineral price go up in line with miners of other resources. It’s also a good time to buys some shares in one or two of these companies.