Gold, the reliable safe haven

Gold fever doesn seem to disappearing anytime soon. The glittering metal reached $1549 per ounce on Monday, strengthening by around 10 percent since the start of the year.
The same old fiscal woes across the US and Euro zone and political uncertainties in the Middle Eastern region take the major share of the blame for helping gold in its smooth upward journey. With supply relatively inelastic, the massive growth in gold fans during the past few years has been causing a stir in the precious metal markets.
The recent hike in yellow metal is symptomatic of a fragile US economic recovery stemming from weak job data, released last week, as the countrys unemployment rate inched up to 9.1 percent last month from 9 percent in April. Thus raising concerns that the US Fed might delay monetary tightening, which sounds pollyannaish for gold.
"The market has been climbing a wall of fear and the same things that have been driving gold higher the last two years are still in place," Bill ONeill, a principal with Logic Advisors, told a renowned international newspaper.
As there is sheer risk awareness among investors, amid weak performance at major stock exchanges, investors feel secure if their saving portfolios hold gold and precious metals.
The "Gold Demand Trends First quarter 2011" report released by World Gold Council (WGC), last month, echoes recent supply-demand trends in the gold industry. Data compiled by WGC shows that global demand for gold surged YOY by 11 percent to around 981 tons in the first quarter, with the growth led by investment sector.
The investment segment absorbed nearly 311 tons of gold in 1QCY11, as against 246 tons in same quarter a year earlier. At the same time, gold demand generated from jewellery sector consumption surged by 7 percent to 557 tons, while demand from technology sector remained constant at 114 tons.
The official sector also played their part in driving gold appetite, as purchases by central banks totaled 129 tons. Out this, Mexico purchased nearly 93 tons of gold while Russia purchased 22.5 tons.
Since, most global gold analysts expect central banks world over to remain net buyers during 2011, gold may be expected to continue its northward journey. Yet, the growing possibility that developing economies might raise interest rate in the coming months to cap inflation may check the already steep growth in gold prices.