World Jumping on Gold Boom Bandwagon

The rapidly soaring demand for gold has led to surging prices of the valuable metal.

With gold growing as a prominent investment product, gold refiners are gathering gold rings, bracelets and necklaces to be turned into gold bars from across the world. Some are even attempting to develop new gold mines.

In a nutshell, a new “golden era” for the metal has arrived.

The small Swiss city of Mendrisio produces a third of the world’s gold bars. Argor-Heraeus SA is a major refiner in Mendrisio that processes roughly 400 tons of gold per year.

In an interview with the New York Times, Argor-Heraeus SA CEO Erhard Oberli said, “As gold prices have recently surged, a large amount of bangles, bracelets and necklaces arrive in plastic bags from souks in the Middle East, from pawn shops in Asia, and from corner jewelers in Europe and North America every day.”

According to the World Gold Council, gold investment jumped 51 percent in the second quarter but spending on gold accessories such as bracelets, necklaces, and rings fell 20 percent. That means gold accessories have been rapidly replaced with gold bars.

In a media interview, Suki Cooper, a metal strategist for Barclays Capital, said, “The global gold frenzy has been fed by hedge funds and central banks. Even individual investors have also fueled the frenzy. It’s a structural shift we’re seeing on the investing side.”

In cooperation with Swiss gold refiner PAMP, upscale London department store Harrods has begun selling gold products ranging from tiny one-gram ingots to hefty 12.5-kilogram gold bricks.

Chris Hall, head of Harrods Gold Bullion “The response has been astounding. Bars are definitely more popular than coins. The 100-gram bar is the most popular.”

In the United States, even ads for gold bars or ingots are securing late-night television spots.

Amid the gold frenzy, the spot price for gold jumped to a record 1,104.80 U.S. dollars per ounce on the London Commodity Exchange yesterday. Moreover, the gold price for December delivery hit 1,105.4 dollars per ounce, another record high.

Experts, however, are mixed over the prospects of gold prices. Jim Rogers, chairman of Singapore-based Rogers Holdings, said gold could reach 2,000 dollars per ounce.

Nouriel Roubini, professor of economics at New York University`s Stern School of Business, however, derided this forecast as “utter nonsense,” citing lack of inflationary or economic pressure that could drive the price of gold to that level.

jaeyuna@donga.com