Investment demand for gold could remain intact in 2010 as the global central bankers doubt the role of the dollar as a global reserve currency, a senior research analyst said in Mumbai.
"Investment demand for gold could remain intact in 2010 as the global central bankers doubt the role of the dollar as a global reserve currency. Hence, central banks want to accumulate gold in their foreign-exchange reserves," Angel Commodities senior research analyst, Reena Walia Nair said.
On a year-to-date basis, gold prices have gained 23 per cent as the dollar weakened and as demand for the metal from central bankers rose.
Though gold prices have fallen from their record highs in 2009, we feel that prices could gain in the coming year on the back of a rise in investment demand from central bankers across the globe, Walia said.
The recent global financial crisis that had its roots in the US has disturbed the financial dominance of the US as a global economic power.
In the coming years, the Asian giant China could take over as the world's largest economy and it would take over the role of the US as a major economic power.
Hence, this would give China the dominance in every sector, especially the foreign exchange markets.
The special drawing rights) as an option to a global reserve currency would be considered more favorable as it would comprise the major currencies and help to create a supra-natural system.
This could lead to higher demand for gold as the dollar could weaken in the coming years and make gold look as an attractive investment from a long-term perspective, Walia said.
The standard gold (99.5 purity) was quoting at Rs 16,660 per 10 gram and pure gold (99.9 purity) at Rs 16,745 per 10 grams in Mumbai bullion market on Thursday.
In the overseas market, spot gold prices slipped as strength in the dollar made the commodity look expensive for holders of other currencies.
A stronger dollar makes the yellow metal look unattractive and leads to selling pressure. Spot gold prices touched a low of $1085/oz and prices on the MCX slipped to a low of Rs16575 on Thursday.
But on a year-to-date basis, gold prices have gained in 2009 as a rise in investment demand, weakness in the dollar and demand from the HNI segment boosted prices, Walia said.
A weaker dollar made the yellow metal look attractive for holders of other currencies.
The yellow metal also gained strength on the back of inflationary concerns but prices have now declined and reacted to the reality of stable inflation.
