Source: CCTV.com

03-24-2008 13:16

Big swings in global prices for gold and a sluggish stock market have triggered a rush to invest in the yellow metal. But experts are advising caution pointing out that recent fluctuations are part of a natural cycle of price correction.

Big swings in global prices for gold and a sluggish stock market have triggered a rush to invest in the yellow metal.
Big swings in global prices for gold and a sluggish stock 
market have triggered a rush to invest in the yellow metal.

Recent fluctuations in world gold prices have triggered a rush of Chinese investors to buy gold, with many hoping to turn a quick profit.

When prices hit a record of 1,030 US dollars an ounce last Monday, people rushed out to buy close to 300 million US dollars worth of gold.

But this was followed by a sudden slump, with prices falling to as low as 904 US dollars by Thursday the same week. The roughly 10 percent drop marks the biggest weekly loss since 1990. But it does not seem to have dampened enthusiasm among investors.

One gold shop staff said "Lots of people are buying gold this year, because they think that the more they buy, the more money they will make. They also belive there is still lots of rooms for further gains."

Meanwhile, many investors are also buying paper gold. Figures from the Shanghai branch of the Central Bank show that trade in paper gold products has surged dramatically since the start of the year.

But many experts are advising caution saying the recent fall in prices is little more than a cyclical correction in as part of long-term trends.

Xu Ming, Trader of Financial Fund Department of PBOC SH Branch said "People should be cautious about the market, especially for the next 2 quarters this year. Because there are still some risks for the market retreating in the short-term, and also because prices may move up and down for a while."

Experts also think that the recent dip could have been triggered by buyer exhaustion. Many say they will not sell their gold holdings and will look into buying again, since the fundamental underpinnings for gold remain unchanged. It's also one way for investors to diversify away from dollar-denominated assets.

But analysts also warn that investing without careful consideration could be a risky business. They're urging investors to take the time to understand the gold market, before plunging in.

 

Editor:Xiong Qu