he worsening economic outlook is forcing investors to seek other anti-inflationary investment tools, like gold," said Xiao Zheng, analyst, Ping An Securities.

Immediate-delivery gold prices reached a three-month high on May 22 in New York at $959.75 per ounce, the highest since February 26, a reflection of growing fears on worsening global economic outlook and devaluation of the greenback, analysts said.

The precious metal has moved up by 19.73 percent from this year's low of $801.59 an ounce on January 15. Gold prices on the Shanghai Gold Exchange (SGE) also saw a monthly growth of 6.74 percent, from 195.42 yuan on April 22 to 209.05 yuan on Monday.

The global economic indicators have also not exactly been rosy. The latest figures released by the US Commerce Department showed a further sign of economic decline. Buildings permits fell 3.3 percent to a record low of 494,000. The Dollar Index, a measure of the greenback against Euro, Japanese yen, British pound, Canadian dollars, Swiss franc and Swedish krone, lost 3.4 percent this week on speculation that the US government's creditworthiness may be weakening.

"Key indices are pointing to a downside trend. Investors prefer to stock value-retaining gold," said Xiao. He added that gold outperforms other non-ferrous metals.

Huang Hao, analyst, Sealand Securities, said the recovering demand from India, the world's largest gold consumer in May is also an important reason for the recent gold price hike.

(China Daily May 29, 2009)