Luxury goods demand could see gold price spike in early 2008

Demand for luxury products in China and India could lead to a spike in gold prices early next year, according to analysts.

Huw McKay, an economist at Westpac Banking Group, told Reuters that gold could trade above $700 an ounce by the end of this year, up from an average of $659.34 so far in 2007.

According to World Gold Council figures, demand for the precious metal in India rose by half in the first quarter of this year, compared to a year earlier, while demand in China also rose - by an impressive 31 per cent.

The growing wealth of the two Asian nations has seen a corresponding demand for the finer things in life, with gold very much a priority for many with high levels of disposable income.

"China is a major emerging market, there is tremendous wealth building up amongst the middle class there, as it is in India,'' said Fat Prophets analyst Gavin Wendt.

"They are spending their money on luxury goods and certainly gold jewelry would be near the top of the list."

The underlying picture in India is that its economy remains buoyant in spite of rising interest rates, meaning that demand is likely to increase further.

"We remain confident over the long term growth prospects of the Indian economy," Kaushal Sampath of D&B India Private Limited told the Indo-Asian News Service.