Exchange forecasts volatile trading in bullion

PUBLISHED : Friday, 30 January, 2009, 12:00am
UPDATED : Friday, 30 January, 2009, 12:00am

The Chinese Gold & Silver Exchange Society, Hong Kong's bullion exchange, said heightened uncertainty in global financial markets and geopolitical concerns would increase the volatility of gold this year.

Exchange president William Lee Tak-lun expects the precious metal to trade between US$730 and US$1,030 an ounce in the Year of the Ox, reflecting strong demand in a time of uncertainty.

Gold surged to more than US$1,000 in March last year but then tumbled to below US$700 before closing above US$880 at the end of last year.

'While widespread world deflation may pressure the price of spot gold and gold futures, continued military tensions in Iran and Pakistan and the vague financial policy of the new Obama administration should provide support to the metal,' Mr Lee said during the first trading day of the gold market in the Lunar New Year.

Bullion was at US$875.24 in early London trade yesterday, down 1.16 per cent from New York's notional close on Wednesday as global stock markets rallied this week.

But it has bounced about 10 per cent since falling to a one-month low of about US$801 two weeks ago as investors see the precious metal as a safe haven amid the global financial turmoil.

The first trade for 99-tael gold in the Year of the Ox was done at HK$8,118, the second-highest Lunar New Year opening price in six years. However, by the end of the day, the contract was last traded at HK$8,108.

Mr Lee said the bullion exchange would introduce electronic trading for 99-tael gold in the second half.

The high price for bullion bodes well for mainland gold producers. Shares of Zijin Mining Group, the mainland's largest gold producer by market value, rose 2.65 per cent to HK$3.87 yesterday, while rival Lingbao Gold closed 6.06 per cent higher at HK$1.75.