The gold price reached a new dollar record of $865.35/oz at the AM fix, breaking the previous record of $850/oz set on 21 January 1980. James Burton, CEO of World Gold Council, commented on record gold price:
“It is very encouraging to see such a positive start to the gold market in 2008. With today's AM fix of $865.35/oz we have witnessed an annual increase of over 37 percent on January 2007's average gold price of $631/oz. It is evident that gold's unique investment attributes as an effective safe haven and dollar hedge have resonated with investors during this time of financial uncertainty.”
The record achieved today is substantially more firmly based than that in 1980. It follows a sustained six year rise in the price and was built on a combination of strong investment and jewellery demand. In contrast the record of January 21, 1980 was the peak of a very volatile market in which the price had risen nearly $300 in just three weeks from the beginning of the year and subsequently plunged sharply, giving up all this gain by mid-March.
In today's financial markets investors seek exposure to gold for a range of reasons. With gold's role as a portfolio diversifier, a hedge against inflation and exposure to the dollar, there are several compelling arguments for investing a portion of one's portfolio in gold. The real value of gold is not that it provides a quick, speculative fix, but its capacity to provide a sure and steady means of protecting wealth and to enhance risk-adjusted returns.
The World Gold Council identified the following short term reasons for the recent gold price rise: • Inflationary fears as a result, in particular, of high oil prices. Gold is seen as a hedge against inflation; while its real value can vary in the short term, its purchasing power has remained stable over the centuries • Continued weakness in the dollar. Gold is a statistically proven hedge against fluctuations in the US dollar, the world's main trading currency.
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