Wealthy speculators and governments rushing to boost their gold reserves are sending demand sky high, a level some expect prices to reach as well.
“It’s not that gold has changed, but gold buyers have changed,” Suki Cooper, a precious-metals strategist for Barclays Capital told The New York Times.
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“It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”
The World Gold Council says that gold demand for jewelry plunged 20 percent while investor demand for gold increased 51 percent during the second quarter.
The willingness of Swiss bankers to give up the names of numbered account holders is also believed to be playing a part in gold’s rising popularity as rich investors seek assets that can be kept out of tax collectors’ sight.
However, some market observers believe that the rally in gold may be reined in by options selling sometime in the next four to six months, if hedge funds and other institutional investors begin to view the rally as overstretched.
Options in Comex gold and the over-the-counter market predict the precious metal has a 25 prcent chance of being above $1,400 a troy ounce by the end of 2010, according to J.P. Morgan managing director Neil Clift.
"I'm in the bullish camp,” Clift told The Wall Street Journal.
“At the moment the market is in bullish mode and I actually am probably more a bull than most."
But “at some point we'll see people coming in to sell options. There is potential value to be had in selling away the topside. It may be a long time before that happens. But at some point it will."
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