Six Factors and Bulls Like Jim Rogers Drive Gold Rush

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Gold hit a record high of $1,143.60 an ounce on Monday. The yellow metal has been on the upswing amid a weaker dollar, uncertain economic conditions and raising concerns of inflation. Commodities guru Jim Rogers, chairman of Singapore-based Rogers Holdings, who predicted the start of the commodities rally in 1999, expects gold to rise $2,000 an ounce over the next decade.

Financial Chronicle takes a look at the key drivers of the gold surge.

Investor demand

Rising interest in commodities, including gold, from investment funds in recent years has been a major factor behind bullion’s rally to historic highs. Gold’s strong performance in recent years has attracted more players and increased inflows of money into the overall market. Investors, wary of the weak dollar and ultra low interest rates, are turning to gold.

US dollar

The currency market plays a major role in setting the direction of gold, as bullion prices move in the opposite direction to the dollar. A weak US currency makes dollar-priced gold cheaper for holders of other currencies and vice versa. US Federal Reserve has said that interest rates will stay at zero for some time, which means the greenback will remain weak.

Central banks’ gold reserves

Central banks hold gold as part of their reserves. Buying or selling of the metal by banks can influence prices. On Tuesday, the Central Bank of Mauritius bought 2 tonnes, worth about $71.7 million, of gold from the IMF. Earlier this month, RBI purchased 200 tonnes for $6.7 billion. IMF is selling gold to shore up its finances.

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Jim Rogers has taught finance at Columbia University’s business school and is a media commentator worldwide. He is the author of Adventure Capitalist, Investment Biker, Hot Commodities, A Gift to My Children, and A Bull in China. See his website.

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