David Wighton: Business Editor’s commentary
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The extraordinary surge in investment demand for gold in recent months reflects, in part, the evaporating confidence in banks. Many investors don’t even trust banks’ safe deposit boxes. Demand has also been boosted by falling interest rates, which reduces the opportunity cost of holding gold, an asset that provides no income. Yet the gold price has tumbled by a fifth since early October. This stems partly from concerns about demand for gold jewellery and receding fears of inflation, for which gold is a hedge. But gold bulls say the price slump was caused largely by forced selling by hedge funds and a strong dollar. Some see a future of low interest rates and resurgent inflation, which is a glittering prospect for gold.
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