Gold Prices Roar Back Over Unrest in Arab World

Seekers of financial safe havens amid the unrest in North Africa and the Middle East have once again taken refuge in gold, driving the price per ounce over $1,400 for the first time in almost seven weeks.

Reuters reported that Monday saw gold prices hit levels they have not seen since Jan. 19 (for euro-priced gold) and Jan. 14 (for sterling-priced gold) as turmoil spreads across the Middle East/North Africa (MENA) region. Daniel Major, an analyst at RBS Global Banking & Markets, said in the report, “There is no doubt that the recent move higher across the precious metals reflects a degree of safe-haven buying as a result of the unrest in the Middle East.”

He went on to say, “If [buying] is not through the exchange-traded funds [ETFs]or a clear change in the net long on Comex, it is most likely to be through the physical market—coin and small bar buying, and I potentially wouldn't rule out larger purchases by high-net-worth individuals on the back of the unrest we're seeing,” and added, “That has clearly been a game-changer in the last couple of weeks for gold and silver after what was quite a lethargic start to the year in terms of identifiable investment demand in the exchange-traded funds.”

New York's SPDR Gold Trust, the world’s largest gold ETF, saw its holdings fall to a nine-month low of 1,233.098 tons even as prices rose.

Other precious metals’ prices responded to the unrest as well, with silver hitting a 31-year high and palladium a 10-year high. The number of ounces of silver required to buy an ounce of gold fell to nearly a 13-year low, at approximately 42, as silver outperformed gold. Platinum hit $1,844.25 per ounce against $1,833.50.

Morgan Stanley said in a statement, “Precious metals continued to recover as civil unrest intensified in the MENA region, with silver touching levels not seen since the peak of the Hunt Brothers squeeze in 1979/80.” The statement continued, “We expect the combination of continued strength in investment demand and a sustained industrial demand recovery will support silver … this year before easing amid improved economic conditions in 2012.”