Market turmoil fuels new gold rush

Sydney (ANTARA News) - Turbulence on world stock markets has fuelled a new gold rush, sending high-tech traders in search of the same "barbaric" treasure mankind has lusted after for millenia.

It was British economist John Maynard Keynes who called gold a "barbaric relic" early last century, but modern investors are showing the same enthusiasm for the precious metal as the grizzled prospectors of legend.

"We have to put gold into perspective right now with the meltdown in the financial system," Warwick Grigor, chairman of Far East Capital, told AFP.

"There's great fear out there, and gold stands out as a safe haven.

"When there's fear of inflation gold is something investors want to purchase because there is a very limited supply -- you can't flood the market with gold.

"Governments can print money -- that creates inflation. Paper money is just a promise and that promise gets abused constantly by governments."

Gold hit an all-time peak of 923.73 dollars an ounce on the London Bullion Market on Friday after a week in which global stock markets plunged on fears of a recession in the United States.

To staunch the bloodbath on the markets, the US Federal Reserve intervened with a surprise 75 basis points cut in interest rates, a move Grigor described as a short term fix which would push up inflation.

While gold's rarity is cited as the main reason it will maintain its value in volatile times for stocks and paper money it also seems to wield a primitive fascination beyond its worth.

"Gold may not be rational but human beings are not necessarily rational either," said author and analyst Trevor Sykes.

"Gold has been around for about 3,000 years whereas paper money has been around for only a couple of hundred years and the way things are going I would back gold to outlast most of the paper money in this world.

"It does make nice jewellery, it's very attractive, it appeals to our primeval urges and it looks like it's got a terrific future."

It has been used for centuries as a symbol of wealth in anything from jewellery to gold bathroom fittings or even the coffin of Egyptian Pharaoh Tutankhamun, who died more than 3,000 years ago.

As currency, the history of gold coins is usually traced through the Roman Empire back to Lydia in what is now Turkey, where it is believed the first real coins were struck around the 6th century BC.

In modern times, the Bretton Woods system introduced after World War II obliged countries to maintain the value of their currencies in a tight link to gold, but the mechanism collapsed in 1971.

Recent events, however, have shown that when stocks and paper money are stumbling, investors head to the soft, malleable metal with its seductive gleam.