With global central bankers doubting the role of the dollar as a global reserve currency, investment demand for gold could remain intact in 2010, a senior research analyst said here.
"Investment demand for gold could remain intact in 2010 as the global central bankers doubt the role of the dollar as a global reserve currency. Hence, central banks want to accumulate gold in their foreign-exchange reserves," Angel Commodities Senior Research Analyst Reena Walia Nair said.
On a year-to-date basis, gold prices have gained 23 per cent as the dollar weakened and demand for the metal from central bankers rose, Ms. Walia said.
Though gold has fallen from record highs in 2009, we feel that prices could gain in the coming year on the back of rise in investment demand from central bankers across the globe, she added.
The recent global financial crisis that had its roots in the US has disturbed the financial dominance of the country as a global economic power.
Expectations of the Asian giant China taking over as the world's largest economy and gaining dominance in the foreign exchange markets could lead to higher demand for gold as the dollar could weaken in the coming years and make the precious metal look attractive from a long-term investment perspective, Ms. Walia said.
Standard gold (99.5 purity) was quoted at Rs 16,660 per 10 gram and pure gold (99.9 purity) at Rs 16,745 per 10 gram in Mumbai bullion market on Thursday.
In the overseas market, spot gold prices slipped as the US currency gained strength. The dollar is inversely related to gold and makes the precious metal look unattractive when strong, leading to selling pressure.
Spot gold prices touched a low of USD 1,085/oz and prices on the MCX slipped to a low of Rs 16,575 on Thursday.
But on a year-to-date basis, gold prices have gained in 2009 as a rise in investment demand, weakness in the dollar and demand from the High Networth Individual (HNI) segment boosted prices, Ms. Walia said.
Gold also gained strength on the back of inflationary concerns, but prices have now declined due to an outlook of stable inflation.