After Katrina, gold is a more alluring bet

MUMBAI: Gold prices are rushing towards their peaks abroad, following the devastation caused by hurricane Katrina in the US, which is expected to cost anything between $60 billion and $100 billion in damages.

So, is this a good time to invest in yellow metal?

“Most certainly,” says Mukul Sonawala, president, Bombay Bullion Association. “Because, even if prices rise, the demand for gold will not be impacted as we are moving into the festival season.”

According to a survey conducted by Bloomberg, the hurricane will boost the appeal of the precious metal as a hedge against inflation and a slowing US economy. 24 of 31 traders, investors and analysts surveyed Sep 1 and Sep 2 advised buying gold, which rose 1.4% to $448.50 an ounce last week on the Comex division of the New York Mercantile Exchange.

Two recommended selling the metal and five were neutral. Gold’s high this year was $455.30 on August 12. Considering the overall buoyancy and the sense of well-being in the country, says another analyst with an NCDEX broker, this year could see some historic levels of buying during the festival season that stretches from October to January.

“Over the last year, there has been a tremendous increase in purchasing power of families. A lot of folks have made significant gains in the stock markets. Salaries have risen like never before, and there’s a higher level of savings. I see a jewellery buying spree in the festive season,” said the analyst.

Prithviraj Kothari, director, Riddhi Siddhi Bullion, told DNA, “The price of gold may rise to $455 internationally as the dollar is losing strength.” He believes the prices could be jacked up  afresh under the pretext of the calamity and the flare-up in oil.   “This will affect the domestic market as well. Also, we must wait out the 9/11 anniversary. Prices may come down after that,” he said. Sonawala, however, differs with Kothari in that he doesn’t think  9/11 anniversary will have any effect on prices now.

With stocks rolling so high, will there be a demand of gold as an investment? “Definitely,” Sonawala says. “People will switch to gold because, besides being a good investment, it is a hedge against inflation.”