Jewelry shops may be turning barren in Pakistan as gold price in the local market is near record high Rs31,800 per 10 grams, but the yellow metal is in high demand elsewhere among investors.
The growing skepticism over the fate of worlds leading currencies has compelled investors to park their savings in the safer hub of the yellow metal, which has naturally pushed gold prices up to a five month high of $1,188/ounce in international markets.With Greece on the verge of collapse, Spain and Portugal on watch list and Argentina suffering from severe debt woes, investors are distancing themselves from leading global currencies, fuelling demand for the yellow metal.
The worsening currency turmoil has also led to a fundamental change in gold prices historically inverse relationship with the dollar index. In a time when dollar index strengthened by 5 percent during the last quarter, dollar price per ounce slipped by a mere 0.5 percent, showing a weak gold-dollar index relationship.
Investor deficit of confidence in global currencies has reached new heights as even the upcoming $147 billion bailout package for Greece has failed to ease investors concerns. The notion that the rescue package is not adequate enough to resolve long-term issues have gained support -- sending euro further south in currency markets
Increasing appetite for gold can be analyzed from the recent survey conducted by World Gold Council with an overwhelming majority of nearly 77 percent either intend to increase exposure or maintain it, as against only 7 percent respondents who do not see the gold glittering in the future.
It is quite likely that these 7 percent bullish investors have concerns over Chinas recent tightening measures, which may slightly slowdown both the demand of gold and its price.
That said, as long as gold and currencies are used as alternatives to each other, it is more likely that negative developments for gold price will be outweighed by the ones favouring the demand and price hike, as other European nations may well be next on the receiving end of financial crisis.