Saudi gold reserve guesstimate doubles

Estimates of the gold reserves held by Saudi Arabia have been doubled to 323 tons after an accounting change.

The Middle East kingdom had previously been calculated by the World Gold Council as owning a mere 143 tons.

The trade organisation said it changed its estimate "as a result of the adjustment of the Saudi Arabian Monetary Agency's gold accounts".

The surprise upward revision may partly be due to previously unknown gold purchases since 2008.

The price of gold has risen at an accelerating pace since 2001, and currently trades at $1,255 per troy ounce, about five times its level of 2001.

In London on Monday, gold surged to $1,265.30 per troy ounce.

"Gold has reached a new all-time high," said Commerzbank analyst Carsten Fritsch.

However, the metal suffered a brief collapse in value during the financial crisis of 2008, from $1,000 to below $700

Analysts say this dip in price may have been used as a buying opportunity by the Saudis.

Gold is treated as the ultimate safe investment by central banks - safer even than so-called "fiat" currencies like the US dollar, because there is a definite limit on the supply of gold.

"I think that it is a trend for central banks in the Middle East to buy more gold to limit exposure to inflation and instability to currency markets," said Pradeep Unni, senior analyst, Richcomm Global Services in Dubai.

"This precious metal is profiting from its status as a 'safe haven' and is likely to remain in strong demand as long as doubts persist about the chances of successfully resolving the debt crisis in Europe," agreed Mr Fritsch.

The precious metal briefly went out of favour in 2008 amid fears of a deflationary depression in the US, which would have increased the purchasing power of the US dollar.

But since 2009, growing market fears over the indebtedness of governments, including the USA, have given the gold market a new fillip.