Asian Gold Buyers in Frenzy After Price Falls

Asian buyers of gold went into a buying spree Thursday as other skilled investors liquidated their investments of the safe haven metal on speculation of a dollar strength rising.

Gold fell below $1,600 an ounce on Wednesday.

The heavy selling of the precious metal in Asian trading led gold bargain hunters to pick up the now cheaper metal. Experts forecast prices could drop further.

"A close below $1,618 an ounce Wednesday would signal another move lower," a Singapore-based analyst whose name was withheld said in the Wall Street Journal.

Other analysts particularly recommend purchasing gold at the present price rate.

"Consumers should look to buy the dips in gold," the goldnews.bullionvault.com said, based on a note from Standard Chartered Bank, pointing to the relatively heavy appetite the Asians have for gold.

"Any [price] weakness is likely to be short-lived and problems in the global economy will be supportive over the medium term," the note further said.

Throughout history, gold has been a far more popular investment option in Asia than in the West. Gold stands out as a sound investment and the ultimate hedge against inflation.

"The selling we've been seeing is more to do with pre-Christmas book squaring and technicals than anything else," Owen Hegarty, vice chairman of gold developer G-Resources, said in Wall Street Journal.

Gold will definitely trend again higher next year as investors seek safe stores of value and central banks continue buying the precious metal to add to their gold reserves, he said.

Gold purchases by central banks around the world have more than doubled by 114 per cent over the previous quarter. Figures from the Gold Demand Trends report for Q3 2011 by the World Gold Council showed the gold-buying spree of central banks from China, Russia, Thailand and Mexico in the third quarter of 2011 alone revealed a hike of more than six times to 148.4 tons compared to a year ago.

Central banks have been aggressively buying the yellow metal to increase their total reserve allocation as banks diversify investments away from U.S. dollars.

"As long as the dollar is gaining, at least until the end of the year, gold will not be in the best position and will remain under pressure," Nikos Kavalis, a commodities strategist, told Reuters.