Gold at a price

By Malik Gunatilleke

Prices of gold jewellery in the domestic market has increased greatly as gold hit a record high of 1000 $ an ounce in the international market, in view of fears of a US market recession. The price of a 24 karat sovereign of gold has increased by Rs.700 in just two days to Rs.27,700. This meant that a gram of gold in the market would be priced as high as around Rs.3,500.

The sudden increase in gold prices comes as the US dollar is ailing while a market recession looming large in the US has pushed foreign investors to buy gold as an asset to protect their wealth. Since the US dollar is the currency for transaction of gold in the international market, investors with alternate currencies are looking to buy gold at a profitable rate while the dollar is low.

Specialists say that gold is one of the few assets that doesn’t lose its value over time and would be profitable for consumers to purchase gold as a form of saving their wealth.

Meanwhile, gold prices have also hit Sri Lanka badly as Jewellery Traders Association president K. Radhakrishnan told The Sunday Times that the increases in prices would hurt the middle-class consumer as well as the industry itself.

“Consumers do not earn enough money to cope with the cost of living and save enough to enjoy luxuries such as gold. If a person wants to buy a five sovereign wedding ring he will now opt to buy a three sovereign one to save money,” he said.

Mr. Radhakrishnan said there were many reasons for the sudden world market increase in gold prices such as high oil prices, increasing tensions in South Africa and Nigeria and the increased demand in China. He said that some gold mines in South Africa and Nigeria had been without electricity for as long as a month while workers were protesting causing a scarcity in the market.