It is glittering and it is gold

In the wake of weak US housing market figures and a patchy global recovery, nervous investors are left with no other option but to find bolt-hole in gold.
Gold showed its strength as it managed to touch $1,237 per ounce last week, up from $1,188 per ounce at the start of August. In line with the international market price trend, metal prices in the local market also surged to Rs 33,685 per 10 grams from Rs32,571 per 10 grams at the start of the month.
On the back of the waning dollar, along with the persistent fears of a double-dip recession, yellow metal as an investment instrument is gaining ground. Consequently, the SPDR Gold Trust, the biggest exchange- traded fund backed by the bullion, saw inflows as gold holding surged to around 1,298 tons by August-end from 1,282 tons, as of 30th July.
With the festive season in India looming, the market expects the gold demand to stay high over the next two months. Growing prosperity and the savings in India and China, the two largest gold buyers - on the heels of high economic growth and better agriculture output this year, would keep the gold demand in fashion during the latter half of the year.
Rising temptation for the yellow metal in India can be gauged from the fact that its jewelry sector purchased 552 tons of gold during FY10, up from 465 tons a year earlier, according to the World Gold Council.
Likewise, the growing availability of gold-linked securities such as Exchange Traded Funds, in these gold loving countries will also increase the appeal for gold as an investment class.
As the gold buying pattern in these two countries wields enormous clout in the global bullion markets, the market anticipates the prices to stay strong during 2010. Paul Walker, Chief Executive Officer of London-based researcher GFMS Ltd, expects the yellow metal to reach $1300 per ounce this year.
To predict the pace of a global recovery, the market is keeping an eye on the upcoming US non-farm payroll report, due to be released this week. However, if the data released in the report suggests an improvement, high demand from India and China will protect the metal price from falling.