Uncertainty set to boost gold price

Economic and political uncertainty look set to boost the price of gold, an investment management group said today.

The increasing threat of war with Iraq, falling share prices, corporate uncertainty and a sliding dollar could all raise the price of the precious metal, said Close Wealth Management.

But it warned investors to treat gold as a trading asset, holding it for only a short time before selling it again, because its price tended to be very volatile.

Chief executive Martin Smith said: “Recently gold has performed very well with its price rising by over a quarter during the last year.

“It is now valued at around 350 US dollars (€331) per troy ounce compared to a 22-year low in the spring of 2001 of 254 US dollars (€240).

“Some analysts are predicting that its price will soon rise to 400 US dollars (€378) an ounce.”

But he added: “Investors should not forget that gold has had to endure some very difficult times and with its history, we would not recommend many investors to hold on to this for a long period of time but rather look to sell in the short term and take their profit.”

The group said gold had been a very poor investment during the past two decades, plunging from a high of 835 US dollars (€790) an ounce in January 1980 to about 350 US dollars (€331) today, while long-term demand for gold looked set to fall.

But despite this, it still expected the price of gold to increase further in the short term.

Mr Smith said: “We believe that there is still further growth in gold over the short term, but when greater certainty returns to the stock market and confidence grows in the management and corporate governance of business, the price of gold could start to fall.”