Gold gets another lift on global economic worries

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For months, the gold market has been in a tug of war between two camps: Hedge funds and other institutional investors and speculators have been bailing out of gold futures contracts to raise cash, while individual investors have been hungry buyers of gold coins and bars.

The sellers had prevailed for most of the last six weeks, driving the metal down to near $700 an ounce by Nov. 13, from $900 in late September.

Now it looks like the buyers finally are gaining the upper hand. Gold futures rose $43.10 to $791.70 an ounce in New York today, the highest price since Oct. 16.

The World Gold Council reported this week that net retail investment demand for gold (such as for coins and bars) jumped 121% in the third quarter ended Sept. 30 from a year earlier, to 232 tons.

With concerns about the global economy worsening, ‘What you’re seeing is people moving into gold as part of the ‘flight to quality,’ ‘ said Stephen Platt, a commodities analyst at Archer Financial Services in Chicago.

‘We’re selling everything we can pull in,’ said Ken Edwards, a partner at gold dealer California Numismatics in Inglewood. Despite the battering in the gold futures market in recent months, demand for physical gold, such as coins, ‘has been completely one way,’ he said. If anything, lower prices have fueled more demand, he said.

Many buyers, Edwards said, are figuring that global governments’ unprecedented efforts to pump money into the financial system will inevitably lead to higher inflation down the road -- even if the immediate concern of central bankers is deflationary pressures as consumer spending slumps.

‘What I hear from [investors] is that they think deflation is a short-term issue,’ Edwards said.

Gold futures hit a record high of $1,004 an ounce in March, then began to tumble as the dollar rallied. This time around, gold is gaining even though the dollar remains strong.