Safe-haven rush pushes gold to glittering new peak in SL

• Sri Lankan market operates on recycled gold, but the market price reflects the trend of the international market price 
• Hedge funds, even central banks who are traditionally holding dollar reserves, are converting part of their portfolio into gold 
• Industry says hike nothing to do with local demand

By Nishel Fernando  

Gold prices in Sri Lanka surged to an all-time high on  Friday, shattering previous records as investors worldwide flock to the  precious metal amid growing economic uncertainty.   

Local experts attributed the sharp increase entirely to international market pressures, dismissing local demand as a factor.  

Lalitha Jewellers Colombo Executive Managing Director  Sellakumar Kandasamy confirmed the new highs at the close of business on  Friday.  

“Yesterday the 24-carat price was close to Rs. 417,000,”  Kandasamy stated. He noted that the 22-carat price settled around “Rs.  385,000 to Rs. 386,000.”  

Earlier in the day, the All-Island Gold Jewellers’  Association reported that the 24-carat sovereign had breached the Rs.  400,000 mark for the first time, pricing it at Rs. 410,000 in the  morning—a staggering Rs. 15,000 increase from the previous day.  

According to Kandasamy, the dramatic price hike is not a  local phenomenon but a direct reflection of a steep climb in the  international market.  

“This has nothing to do with local demand at all.  Basically, the international market price is actually moving pretty  high,” he clarified.  

Kandasamy pointed to two primary drivers for the global  rally: a major capital shift by institutional investors and widespread  economic uncertainty.  

“There’s a lot of money which is going out of the US  treasury funds. Hedge funds, even central banks who are traditionally  holding dollar reserves, are converting part of their portfolio into  gold,” he explained.

This move is compounded by global instability, particularly from trade disruptions.   

“Another reason is also because of the lot of uncertainty created by the tariff situation in by the U.S.” Kandasamy added.  

“Normally, when there is uncertainty about business... money  tends to go into gold because gold is supposed to be the last resort...  like a safe haven. It’s a store of value.”  

He explained that in Sri Lanka, where there are no official gold imports, the market operates on recycled gold.   

“Our market price reflects the trend of the international market price. That’s how it is.”  

The local price surge mirrors a global trend, as  international spot gold prices surpassed US$4,300 per ounce for the  first time on Thursday, according to a Reuters report. The metal gained  7.6 per cent this week alone, fuelled by renewed U.S.-China trade  tensions and expectations of a U.S. rate cut.  

This rally is reflected across Asia. In India, domestic  gold prices hit a record high, with dealers charging premiums of up to  US$25 per ounce as jewellers stock up for the upcoming Dhanteras (start  of the five-day Diwali festival) and Diwali festivals. In top consumer  China, demand also appears to be returning.  

Meanwhile, dealers in Singapore reported that strong demand  continues to deplete inventories, reinforcing the global sentiment that  in times of uncertainty, gold remains the preferred asset.