Cash from Far East investors is pouring into the world's gold exchanges on the belief that the precious metal now looks more promising than currencies and stocks, traders say.
''Basically, the advances this time are based on gold's improved fundamentals. In the long run, the bulls are likely to lead the market, perhaps to $500," said Takeo Umezawa, senior trader at Sumitomo Corp., a leading trade house.Bullion has risen more than $30 an ounce since October to trade at around $414.50 in the Far East Tuesday. On the New York Commodity Exchange Inc. November gold closed at $413.40 an ounce, down from $413.90 on Monday.
Gold analysts say the recent price surge is due to supply-and-demand factors as well as heavy speculative flows from the equity markets.
"In addition to jitters over stock prices, interest rates and the
dollar, the supply-demand balance has improved a lot because major producers have stopped selling forward," said Itsuo Toshima, regional manager of the World Gold Council, a global industry promotional body.
This year began with heavy forward selling, or sales for delivery in the future, by producers such as Canada, the United States and Australia. Traders believe these producers have now sold most of their stocks forward.
In addition, a slowdown in gold production by those three nations is likely in 1990, Australian trade sources said, and that should support prices.
"Over the next year, the supply could ease off," said J.B. Were analyst Robin Widdup in Sydney.
Supplies from Australia should also be slowed by the imposition of a 39 percent corporate tax on gold producers from Jan. 1, 1991. Gold miners there currently are not taxed.
On the demand side, increasing purchases of gold jewelry in Asian countries, Japan in particular, are supporting the market.
"Gold not only stores wealth, it displays wealth," said Warren Edney, analyst at brokerage A.C. Goode in Sydney.
Japanese gold jewelry demand in 1989 will hit a record 125 metric tons at least, up from 109.1 tons last year, according to the World Gold Council.
Overall Japanese gold imports in October, excluding coins, jumped to 19.26 tons from September's 16.83, government figures show. Taiwan's gold imports, excluding coins, could rebound to 15 tons a month in November and
December from 10.9 tons in October, dealers there say. Demand is expected to be particularly strong around the Chinese New Year in January.
In Singapore, trading volume in the retail gold market has risen by up to 20 percent since world prices started climbing.
Tokyo traders say Middle Eastern nations, Turkey and India have been active buyers. One factor drawing buyers is concern about stock prices after the Oct. 13 mini-crash, when the Dow industrials in New York fell 191 points.
"In addition, the market's expectations of easier U.S. interest rates have encouraged investors to diversify their investments or to engage in speculation in gold," a dealer in Hong Kong said.
Investors in Taiwan are switching to gold from stocks because of concern about recent depressed conditions on the local exchange, bullion dealers there said. Speculators in Singapore are also using the precious metal as a hedge in the face of uncertainty over the local share market, dealers said.
"Investors have picked up interest in the gold market because of uncertainty about the local stock market, which is due to sever a 16-year relationship with its Malaysian counterpart by the end of 1989," a Singaporean dealer said.