(Updates prices, adds quotes on hedging)
By Lewa Pardomuan
SINGAPORE, Nov 9 (Reuters) - Sales of gold scrap accelerated
in Asia as jewellery makers took advantage of multi-year high
prices, but worries over the slumping U.S. dollar and rising
energy costs also spurred purchases from investors.
Demand from India, the world's largest buyer, slowed to a
trickle, with jewellers already well stocked ahead of Diwali, the
Hindu festival festival of lights. Gold <XAU=> cost $833.70 an
ounce, a whisker away from the record peak of $850 struck in
January 1980.
"People are still interested in investing in gold for wealth
protection and portfolio diversification because their view is
slightly for a longer term," said William Kwan, a dealer at
Phillip Futures Pte Ltd in Singapore.
"They are looking for the opportunity to buy more," he said.
Gold can be bought as investment in the form of coins and
small bars, gold certificates, gold-backed securities or
gold-oriented funds, in which investors can buy shares of mining
companies.
Gold has risen more than 30 percent in 2007 as safe-haven
buying increased due to credit market turmoil and worries about
the health of the U.S. economy that sent the dollar to record
lows, and record high oil prices <CLc1>.
Gold is often used by investors as a hedge against inflation
and an alternative investment to currencies and bonds.
"I still see some dishoarding but it looks like the
Indonesian side is a bit dry," said a dealer in Singapore,
referring to Southeast Asia's largest consumer.
"It's not because they don't want to sell but it seems they
don't have much to offer because Indonesia imported so little
this year. Anyway, we see a two-way business today," he said.
Gold bars were on par with the spot London price in
Singapore, a centre for bullion trading in Southeast Asia. That
was unchanged from last week, suggesting that sales from main
buyers such as Indonesia and Thailand were offset by demand from
investors.
Gold bars were 25 U.S. cents an ounce lower than the spot
London price in Tokyo, also unchanged from last week
<GOLD/ASIA1>.
"We feel that premiums will remain stable at -$0.25 an ounce
despite a huge sell back from the general public," said a dealer
at a main bullion house in Tokyo.
"We've seen steady demand from the industrial sector because
sales of electronic goods have been good," he said.
Gold-plated connectors are an integral part of plugs and
sockets, and the metal is also used in wiring to connect parts of
semiconductors such as transistors.
WAITING FOR PRICE DIPS
Gold bars were at a discount of 20 cents in Hong Kong, a
centre for bullion trading in East Asia, with jewellery makers
waiting for a price dip.
"We see some selling everyday because the price has surpassed
$800. Nobody wants to buy," said Ronald Leung, director of Lee
Cheong Gold Dealers in Hong Kong.
Gold could rise further because of a struggling dollar. Slow
demand from jewellery makers could curb gains but there was also
a possibility that more consumers would hedge their positions
against rising prices.
"Momentum indicators continue to hover in the overbought zone
and that hints that bullishness is ample," said Pradeep Unni, an
analyst at Vision Commodities in Dubai.
"If there is problem at the moment, it is from the physical
markets that have largely dried up due to low demand. The problem
is that everyone is waiting for a dip to buy and gold disappoints
all," he said.
The dollar hit a record low against the euro on Friday as
fears grew that more U.S. financial firms will be hit by credit
market turmoil and reinforced expectations the Federal Reserve
will cut interest rates further [ID:nT13568]
"Jewellery makers will be looking for opportunity to do
hedging. When prices go that high, they are worried," said Kwan
of Phillip Futures.
"So they will control their risk or manage their risk by
hedging in futures market," he said.
(([email protected];+65 6870 3834; Reuters Messaging:
[email protected]))
* Subscribers can click on <GOLD/ASIA1>to view prices in the
region.
Keywords: GOLD/PHYSICAL