Never mind the price, gold still dazzles Asia

Never mind the price, gold still dazzles Asia

Lewa Pardomuan and Atul Prakash, Reuters/Singapore, Bombay

Villagers in Indonesia may wear one or two gold teeth to boost
social status. In India, parents will not marry off their
daughters without giving them some gold jewellery for financial
security.

Ancient texts talk about Indian merchants venturing on
dangerous voyages to distant lands in search of gold. In China,
gold inlay was applied to bronze objects by at least 1200 B.C.

Gold -- the Glowing Dawn -- has fascinated Asia for centuries
and its demand is likely to only increase in the years ahead, led
by China which seems set to become the last gold-crazed nation in
the region.

In Asia, the yellow metal is not only an item of adornment but
also an investment -- something that, for instance, holders in
quake-prone Japan can sell back for cash in times of trouble.

"In a longer term, you ask people whether they have confidence
in the U.S. dollar? Not really, right?" asked Albert Cheng, Far
East managing director of the World Gold Council.

"Gold is a good financial vehicle where you can put your money
in," he told Reuters in Singapore.

Several Asian countries have seen an increase in demand for
gold for jewellery and investment in recent years, reflecting
economic growth and the metal's growing popularity.

The world's biggest buyer, India, is estimated to consume 600
tonnes of gold this year, up from around 590 tonnes in 2004.
India's gold demand surged 17 percent in 2004 from a year
earlier.

China, another main buyer whose consumption may eventually
match India's, is likely to see demand rising by 10 percent this
year as the country liberalises its bullion market.

Dealers and analysts say investors have diversified into hard
assets such as gold because of the wide U.S. trade deficit and
China's revaluation of the yuan -- a move which will lead to
stronger Asian currencies and a weaker dollar.

A weaker dollar means a more affordable price of gold, which
is quoted in U.S. dollars and currently stands at around $425 an
ounce.

I want gold!

"In a country like India, we don't have enough safe investment
alternatives. People also have money in banks, but they want to
create a portfolio and gold is an important part of the basket,"
said Ranjeeth Rathore, a dealer in Madras.

"I have seen that when prices are low, people don't listen to
any investment advice. They say they want gold. That's it."

Indeed, gold prices have been volatile in recent months,
touching a 3-month high of $443.60 in June, just a few dollars
away from this year's peak at $446.70, before profit-taking and a
firming U.S. currency erased some of the gains.

Gold hit a 16-1/2-year high of $456.75 in December.

But choppy prices fail to dampen the demand in India, where
jewellery forms an important part of Hindu marriages, with
parents giving their daughter gold for financial security.

Hindus treat gold as an auspicious metal and like to buy and
give it as a gift during religious festivals.

"The first choice of Indians is gold. It's a sensible
investment. They want to invest in something which is tangible,"
said Rajesh Mehta, chairman of Rajesh Exports Ltd, India's
largest jewellery exporting firm.

"It is the best saving investment available anywhere in the
world. Gold is the only commodity in which you can invest and can
also use," he said.

The situation is be bit different in Indonesia, where
consumption could fall this year because of a firm gold price and
record-high oil, which cause prices of basic essentials to rise.
Indonesia, Southeast Asia's largest gold buyer, consumed 88.9
tonnes of gold in 2004, up from 82.7 tonnes in 2003.

"Consumption may be below 80 tonnes. The gold price stays high
at above $400 while buying power is depressed," said Leo Hadi
Loe, an independent analyst in Jakarta.

But Indonesia may be a one-off case. Neighbouring Vietnam saw
consumption picking up 10 percent last year to 65 tonnes as
locals sought hard assets for protection against volatile dong
currency. Demand is likely to stay firm this year, say dealers.
Analysts are also upbeat on Asia.

"Strength in both China's economy and currency and heightened
investor interest should support Asian gold demand over the next
year. And with rivers of energy dollars flowing into the Middle
East, demand there shouldn't be too shabby either," Commonwealth
Bank of Australia said in a report.