Hedge funds, after pushing gold prices to 22-year highs, are looking to China and other Asian central banks as the next big drivers of the metal.This month Russia, Argentina and South Africa decided to increase the amount of gold in their reserves, reversing a six-year trend of central bank sales, mainly from Europe.
That helped push gold prices above $500 an ounce on Tuesday, the highest price since December 14, ’87 and double levels seen in ’01.Hedge fund manager Juerg Kiener said it was now only a matter of time before Asian central banks follow suit and diversify more of their $2.6 trillion in foreign reserves holdings into gold to hedge against what he sees as an inevitable decline in the dollar.
Just a hint of Asian central bank buying would set the gold market on fire, said Philip Klapwijk, chairman of London-based consultancy GFMS and a director of the Global Precious Metals Fund. “That’s going to be explosive,†he said.
