Source: The Nation               date: August 17, 2011

Following the United State's downgrade by Standards and Poor (S&P) from “AAA” to “AA+”, panicky investors have run towards gold as a safe bet, Its price has soared in the international markets and resulted in 70,000 contracts per day and up to 900 kilograms of volume trades as opposed to 30,000 contracts per day and 500 kilograms.

Overall, gold exports rose to USD 752.36 million this year, mainly to the US, Hong Kong, Italy and India. However, amidst this rush for gold, gold traders warned that prices may fall, reported the Nation. Prices could fall as low as $1,680 per ounce.

"Investors should only consider investing 20 per cent of their portfolio in gold to diversify their risk away from any one particular commodity,” advised secretary-general of the Gold Trade Association Kricharat Hiruynyasiri.

Gold reached record highs at USD 1,815.50 per ounce, but experts predict prices will hit the ceiling at 1,900 per ounce, reported the Nation. This will most likely result from an economic slow down from the United State's downgrade by S&P and economic crisis in the European Union.

Read more...

Many Asian countries are turning to gold for their foreign reserves rather than US dollars or any other countries. Under normal conditions, the US and European countries might hold up to or more than 50 percent of their reserves in gold while Asian countries would typically hold just 3 percent.

"Due to the volatile price of gold and its higher value, domestic trading of gold has dropped each year by 30 per cent," added Kritcharat.

Kritcharat also noted that over the past 20 years small traders and goldsmiths were leaving the business because of slow trade. Only 20 percent of the 10,000 that once existed still remain. In the modern market, most gold traders focus their business on pledging rather than the sale of jewelry and other luxuries.