Good time to buy gold as Indians get hitched, inflation eyed, NZ Mint says

Monday 20th July 2009

Gold may extend its 6.9% gain this year as investors ponder the prospects of a resurgence of inflation and traders in India prepare for the traditional wedding season, according to New Zealand Mint Ltd.

U.S. gold was recently at US$938.50 an ounce, having climbed from US$878.20 at the start of the year, according to Reuters data. Some 56% of traders and analysts in a Bloomberg survey on Friday predicted bullion will rise this week as the precious metal is seen as a hedge against future inflation.

Mike O’Kane, a dealer at NZ Mint, said New Zealand investors may also benefit if the kiwi dollar weakens against the greenback in the wake of Fitch Ratings’ decision to lower the outlook on the nation’s credit rating to ‘negative.’

The U.S. consumer price index rose a bigger-than-expected 0.7% in June, led by an increase in energy costs. U.S. retail sales rose 0.6% last month, also more than expected. “The more optimistic the economy, the higher the probability of inflation,” O’Kane said.

“In inflationary times, investors target gold as a solid hedge.” NZ Mint trades in bullion and issues legal tender gold and silver coins including its 1 ounce gold sovereign and 1 ounce gold kiwi dollar.

India’s wedding season is typically in September to October, resulting in a surge in demand for gold jewellery for brides.

O’Kane cited a JP Morgan report that the price of gold has gained 10% during the wedding season since 2002. According to the Bloomberg survey, 18 of those polled were bullish, 11 were bearish and three were neutral on gold.

Businesswire.co.nz

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