Bank bailout 'won't detract from appeal of gold investment'

Connecticut-based MF Global Ltd analyst Edward Meir has explained today (October 2nd) that he expects gold to hold firm even if the $700 billion US bank rescue plan is approved.

The bailout was initially rejected last Friday but an amended version was accepted yesterday by the Senate, although it still has to pass through the House of Representatives tomorrow.

Some commentators have suggested that the plan would bring some security back to the markets and lower the appeal of gold investment, but Mr. Meir has dismissed that notion.

He said: "Gold is still perceived as a safe refuge, and perhaps markets are discounting a bailout, which could denigrate the value of the dollar longer-term."

Gold generally tends to enjoy an inverse relationship with the dollar, so a weaker dollar in the long term would push gold prices higher, making investment in the yellow metal a sensible option.

This view has been corroborated by Ralph Preston, an analyst at Heritage West Futures Inc., a firm based in San Diego.

He said: "Gold is muscling higher as uncertainty continues to dominate the economic landscape.

"Investors want stability and gold holds the promise of asset protection.''

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