Exactly one year ago, the price of gold at Ly Hour Exchange in Phnom Penh was $520 per damlung or 1.31 ounces. On Tuesday, it reached $725 per damlung, a 39 percent increase.
Across Asia the price of gold reached $600 per ounce for the first time in 25 years, with gold selling at $601.60 per ounce in Hong Kong, up $5.10 from the previous day, according to The Associated Press.
Economists and gold experts, who attributed the dramatic rise to complex international circumstances on Tuesday, said it was unlikely to have a major effect on Cambodia’s economy.
Huy Navy, director of the foreign exchange at the National Bank of Cambodia, said that some gold experts predict the price will reach $1,000 per ounce within five years.
“Demand from China and the Indian market have increased the price of gold recently, and will continue to increase it,” he said.
“This is the international expectation.”
Economist Kang Chandararot, director of the Cambodia Institute of Development Study, said that the price of gold usually rises with turmoil in the Middle East, as the threat of disruption in the international oil supply drives up the price of energy worldwide.
Energy price increases in turn drive inflation higher, causing investors to convert cash to gold.
Oil prices rose to $69 a barrel in Asian trading on Tuesday, according to The Associated Press.
Kang Chandararot said that he could not advise Cambodians who are holding gold as an investment to sell it now to make a profit.
“Future rise very much depends on the [Middle East] policies of the [George W] Bush administration,” he said, referring to the war in Iraq.
In any case, Kang Chandararot said, Cambodians do not buy gold to resell at a profit when prices go up. “Cambodians hold gold for security purposes, not for speculation purposes,” he said.
Ly Hour of Ly Hour Exchange said that Cambodian farmers are too poor to buy gold, and are not concerned about the price increase—the highest she has seen in 10 years.
Most gold sold in Cambodia comes here via Singapore, she said. “Five years ago, we could buy two damlungs of gold for $700.”
Still, Ly Hour does not believe that the price could reach $1,000 per ounce.
Local demand for gold has also decreased, in part due to the price hike.
“Farmers used to come up to Phnom Penh to buy gold to wear for the Khmer New Year, but this year there are not a lot of people,” she said.