Gold could lose its luster after record high

BEIJING – China’s bullion investments may slow down this year compared with the sharp growth in 2010 as record-high gold prices increased the potential risk of price volatility, industry executives said on Tuesday.

Song Quanli, a senior officer with the China National Gold Group Corp, said the country’s bullion consumption rose to 141.9 tons in 2010, up 94 percent from the previous year, as the realty market and stock market turned bearish.

“Bullion investments will not maintain their high growth rate as in 2010 because the gold price hit a record high and investors will try to avoid risks to slow the investment pace,” Song said.

Gold prices may retreat to $1,450 a troy ounce in the next three months because of the risk of a major sell-off of bullion when the economic backdrop for investment sours, according to a report the World Gold Council (WGC) released on Tuesday.

“We expect to see gold decisively break through $1,600 per troy ounce by the end of this year despite a short-term price retrace because we expect investment demand for gold to remain positive as real interest rates stay low in the leading economies,” said Cameron Alexander, senior metals analyst with GFMS Ltd, a London-based metals consultancy.

Fabrication demand is likely to edge higher in 2011 and growth in jewelry demand will remain strong, mainly coming from China and India, the report said.

Gold prices hit a record high on Monday at $1,549 a troy ounce, for August delivery, on the New York Mercantile Exchange as concerns about Italy’s ability to repay its debt roiled markets.

China, the world’s biggest gold producer and second-largest gold consumer, is expected to report higher output this year, with the country’s gold output surpassing 350 tons in 2010.

The nation’s gold output in 2010 increased 8 percent year on year to 351 tons, while the global gold output increased 3.8 percent to 2,689 tons year on year.

Source: China Daily

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