Buying gold as a store of wealth may 'snowball'

A new report by the global bullion banking division of the Bank of Nova Scotia, Canada's third-largest bank, has suggested that demand for buying gold is set to remain strong for some time to come.

Mineweb reveals that in ScotiaMocatta's December edition of its 'Metals Matters' report, it expresses concerns that gold prices have not gone higher in what it describes as a "bullish climate".

However, it adds that the current travails in the global financial system "seem so deep rooted that demand for gold as a safe haven is expected to escalate".

The website quotes one section of the report as reading: "As central banks' measures to tackle the financial rout start to work, the level of redemptions is likely to slow and that should provide less selling pressure in gold."

The report also adds that if investors continue to lose faith in currencies and the financial infrastructure as a whole, the trend of buying gold as a store of wealth will "snowball".

ScotiaMocatta's latest insight comes after it expressed a similar view in its previous report of the same name, when it expressed concern over short-term gold price prospects but a bullish long-term position.

"Looking forward we think the need for safe-haven investments will grow," it said.

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