In places like India and China they’re buying gold to wear as jewellery, but mostly demand for the precious metal is being driven by fear over the euro zone debt crisis and the threat of a default by the US government on its debts.
Economists believe gold will continue to rise in value. Breaching $1,600 an ounce on Monday, it is up 13 percent so far this year and is on track for its 11th straight year of gains. Since early 2008 it has nearly doubled in price.
Investors are turning to gold as a safe haven believing shares and cash are too risky but that will not last.
BNP Paribas’ Chief Investment Adviser, Andrew Freris said: “Once the deadline on the American side has passed, and that’s going to be a completely non-issue, even if they default for a couple of days; then once the Greek situation is put on some kind of a straight line, then as it is, risk would have been significantly diminished but definitely not gone away”
But for the moment, as shares fall gold goes up. Even soothing words on Monday from the US Treasury Secretary Timothy Geithner – expressed confidence the US Congress would raise the debt ceiling – failed to halt its rise.