Safety of gold investment appealing after Lehman Brothers collapse
Gold investors could potentially receive a huge boost with the news that major US bank Lehman Brothers has filed for bankruptcy protection.
The investment bank's announcement, coupled with the sale of Merrill Lynch to the Bank of America, shocked analysts and has plunged the stock market into turmoil.
Following last week's nationalisation of Freddie Mac and Fannie Mae, the news is another indication that the US financial system is on the brink of ruin.
However, the developments will be received with great interest by anyone with a gold investment, as its safe-haven qualities could see a surge of gold buying in the coming weeks.
The appeal is even greater when one considers that many analysts are predicting ongoing turbulence in the markets, thus heightening the pressure on the dollar, which enjoys an inverse relationship with gold prices.
"The financial sector in the region is very volatile now and we don't expect investors' confidence to recover quickly in just a few days or one week," said Alex Huang, a vice president at Taiwan's Mega International Securities.
While it is unclear whether the precious metal will return to break the $1,000 per ounce barrier it last smashed through in March, levels of gold buying seem certain to increase over the coming months.
David Moore, a commodity strategist at Commonwealth Bank of Australia, added: "Gold is benefiting from investment flows on worries about stresses in the U.S. financial system.''
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