The gold market glitters with vitality amid other faltering markets. Now the question is: How much longer will this boom last?
Prices of gold futures at the Shanghai Gold Exchange have gained more than 11 percent so far this year while the Shanghai Composite Index dived 27 percent.
Meanwhile, the country's gold output rose nearly 6 percent year on year to 127.34 tons in the first five months, said the Ministry of Industry and Information Technology. Gold firms reported a combined net profit of 7.95 billion yuan ($1.17 billion) in the first five months, up 76.8 percent from last year.
Risk aversion came to the fore as fears about the European sovereign debt and global economy rattled investors, said Jiang Shu, a senior analyst at the Industrial Bank Co. Ltd.
But the long gold rally also is stoking fears of a bubble. Many fret that the market is bound for some corrections given rampant speculation. The precious metal will also receive a blow from volatility in international markets. Gold for August delivery dropped 1 percent to finish at $1,195.1 an ounce on July 6 at the COMEX Division of the New York Mercantile Exchange, after touching $1,189.5, the lowest price since May 24.
But with the consumer price index creeping higher in China, gold will maintain its appeal as a hedge against inflation, said Yang Yijun, chief analyst at the Chengdu-based Wellxin Consulting Co. Ltd.
In addition, physical demand for the yellow metal is also on the rise as Chinese consumers dig deeper into their pockets for gold jewelries, he said. |