Current world events 'encourage investing in gold'

Fears of terrorist activity following the attacks of September 11th 2001 and the invasion of Iraq are encouraging investors to hoard gold, driving demand and prices higher, Dow Jones newswire's Andrea Hotter told Fund Strategy.

Consequently, gold prices are less likely to fall even if the dollar rallies. However, they will still rise when the dollar is weak, reports the magazine.

Gold analyst at Standard Chartered Dan Smith told the magazine that those investing in gold seem to be keeping longer relationships with the precious metal.

"It may show that people are steadily building long-term gold positions as they piggyback on dollar weakness," he said.

David Thurtell, metals analyst at BNP Paribas also claims that other countries' negative perceptions of the US are affecting gold demand, with banks in the Middle East investing in and storing gold bullion as a suspicious response to recent US policies.

Gold demand continues to rise following inflation fears sparked by the Federal Reserve's announcement yesterday (March 18th) that interest rates would only be cut by three-quarters of a per cent, according to Bloomberg.

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