Hong Kong gold opens above $325


Gold opened above $325 an ounce in Hong Kong Thursday

Staff and wires

HONG KONG, China -- Gold is continuing its strong run as a safe haven asset, opening in Hong Kong Thursday at $325.05 an ounce.

That is up from Wednesday's close of $323.75 but $2 below the five-year high the precious metal touched in London earlier.

Gold was fixed in London Wednesday at $327.05, its highest fixing level since October 16, 1997.

Gold has risen about 17 percent so far this year, driven by fears of renewed violence in the Middle East, the tensions in Kashmir, fear of further terrorist attacks in the United States, and the decline of the U.S. dollar and U.S. equity markets in recent weeks.

Investors focus on gold

Wall Street's third straight fall this week, along with the dollar's slump against currencies such as the euro and the yen, is making gold more attractive to investors who previously were focused only on the U.S. market.

In the Asia-Pacific region, currencies such as the Korean won and the Australian and New Zealand dollars are up sharply against the greenback.

At about 56.55 U.S. cents, the Australian dollar is at a 16-month high. The interest in gold is also accelerating the trend towards consolidation in the industry, with the latest example being this week's $1.1 billion takeover bid by Canada's Placer Dome for Australian producer AurionGold.

In Europe, the dollar is testing 14-month lows against the euro.

"There's no question that the market is following the weaker dollar, in particular against the euro.The India-Pakistan situation is underpinning the market," Peter Hillyard, head of metals sales in Europe at ANZ Investment Bank, told Reuters news agency.

"The market is capable of going to $332 an ounce," Hillyard said.

Other gold analysts are suggesting gold will get to $330 or $340 later this year.

Big demand in India

Gold went past $400 an ounce when Iraq invaded Kuwait in 1990 and topped $850 in 1980 against a backdrop of the Iranian revolution and the Soviet invasion of Afghanistan.

That spurred unprecedented buying of gold. Today, the biggest gold market in the world is jewelry-conscious India, which accounts for about 855 tonnes a year.

That is more than double the demand in the second-largest market, the United States.

India imports about 70 percent of its gold needs. The gold price there is about six percent above global rates because of local levies. Indian banks normally import gold on behalf of traders from trading centers like London and Switzerland.

India has about 100,000 workshops supplying gold jewelry to nearly 300,000 retail outlets. Most of them are family-owned single-shop operations, according to industry estimates.