Thu, 27 May 2004

Gold price in the local market to continue rise

Zakki P. Hakim Jakarta

A combination of a falling rupiah and the rising international price of gold is pushing the price of the commodity up in the local market.

Experts say that the higher price trend here would likely continue, particularly if the rupiah continues to be under pressure.

A gram of 24 karat gold was offered on Wednesday at around Rp 115,000 (US$12.42), a 5.5 percent increase from last weekend's average price of Rp 109,000 in local markets.

Leo Hadi Loe, a consultant at the World Gold Council (WGC) in Jakarta, said the rising gold price here was triggered by higher gold prices in the international market.

He added that the weakening of the rupiah against the U.S. dollar had further put downward pressure on the price of the commodity.

Internationally the price of gold averaged at between $384 and $387 per ounce on Wednesday, higher than $376.50 per ounce a week earlier. The higher price was mainly due to the weakening of the dollar against other major currencies amid worries that soaring international oil prices would hurt the U.S. economy.

Leo predicted that the gold price at home would continue to rise mainly because of fears that the rupiah's woes will be around for some time.

He hopes the central bank will intervene in the currency market to help prevent a free fall of the local unit.

"It's worrying to see while the dollar is weakening globally, the rupiah is falling," he said.

The rupiah ended at a fresh 19-month low of Rp 9,275 per dollar on Wednesday, compared to Rp 9,260 on Tuesday due to a combination of economic uncertainties at home and political jitters ahead of the July presidential election.

Leo said that the rising gold price would cut trade volume of the commodity in the local market by around 50 percent in the coming months.

In the last three months, the volume reached an average of 20 tons per month and might drop to 15 tons next month.

A Pau, a gold shop owner in Cikini, Central Jakarta, also predicted that the price here would continue to increase.

He was concerned, however, that the rising price would hurt business volume.

He also hopes the central bank and the government will take measures to help rescue the ailing rupiah.