WITH markets falling and prospects for world growth souring, everything should be in place to send the price of gold, the ultimate safe-haven asset, soaring. Just weeks ago this was true. On September 2, gold reached an all-time high of $US1921 an ounce.
But instead of maintaining its new heights, only three weeks later gold lost just over 20 per cent of its value, to hit $US1532.72, its lowest point since July and reached without any signs of a rebound in the world economy.
snip
The pillars supporting high gold prices have collapsed, said Julian Jessop, chief global economist at think tank Capital Economics. ''First, demand for gold as an inflation hedge has fallen as the global economy has slowed and other commodity prices have tumbled,'' Jessop said.
''Second, the more general return of confidence in the dollar has reduced demand for gold as a hedge against a collapse in the US currency.''
Sydney Morning Herald">Click for Full Text!
