Air Strikes Shaking Tripoli and Economy
In response to the air strikes on Libya from the west, oil prices are rising as well as the price of gold. Economists are worried that inflation will set in as gold becomes a safe bet for investors concerned that Mideast tensions will not resolve as quickly as first anticipated.
In addition, analysts are closely monitoring the situation in Japan which seems to have averted a full-scale nuclear meltdown in the aftermath of one of the worst earthquakes in history and the resulting devastating tsunami that took the lives of an estimated 10,000 or more people. The Japanese situation led to three year highs as the price of physical gold premiums surged upwards.
Spot gold posted an increase of 0.2% arriving at a cost of $1,427.86 per ounce at 0706 GMT. This was after reaching $1,434.70 in the proceeding session, which was only $10 from the March 7 record high.
US gold also gained, but just 0.1% to $1,428.20.
“The tension in Libya and the Middle East and North Africa region is supportive of gold prices. There is little doubt that gold would test a new high in the near future,” said Li Ning, an analyst at Shanghai CIFCO Futures.
“In the medium to long term, concerns about inflation will continue to buoy gold.”
Fear of Inflation
Li also said that worry over inflation has been spreading from emerging economies like China, to more developed economies such as the European countries. If oil prices stay high for too long, inflationary trends could set in, which has the effected of strengthening the price of gold which is the traditional vehicle for hedging against inflation.