Domestic demand for gold has slowed as the price of the metal surges in Cambodia and on international markets, traders say.

The Post has derived from Ministry of Commerce statistics that a damlung, or 1.2 troy ounces, of gold fetched US$1,673 on average in January and February, up from $1,341 the year previous – a rise of around 25 percent.

Gold hit $1,705 a damlung on average in Phnom Penh yesterday, according to government data.

Officials from Cambodia’s largest dealer Ly Hour said that gold prices, along with those for other precious metals, have been rising in line with rising global prices, adding demand was falling.

The Kingdom traditionally imports much of its gold from Singapore or Hong Kong.

“[Gold] did not sell well in recent months, because of the hike of the gold price. I think soaring global markets came because of high demand from China and India,” said Ly Hour owner Sieng Lim.

“Buyers cannot afford high prices, especially as they want to avoid fluctuations in its exchange.”

Gold is traditional seen as a safe-haven in times of volatility. It has risen in recent months on global markets, trading at $1,437.61 an ounce on the London exchange yesterday shortly after the market opening - after having hit a record $1,440.32 an ounce on March 2.

Concern about rising inflation and currency debasement drove global gold prices up 30 percent last year, though it had initially declined in early 2011. Silver reached a 31-year high yesterday.

Phnom Penh-based dealer and Virin Ratanak Gold Jewelry owner Virin Ratank said the rise in the price of gold has benefited many Cambodians who traditionally save in the precious metal.

“I predict prices will either remain at record levels, or go even higher in the future,” she said, though added it was difficult to “see the future” in the precious metals market.

But demand for the metal has also abated at Vietnamese-owned gold seller SBJ Cambodia, which opened a Phnom Penh office in June.

Production Department official Sim Sarith said demand had been strong last year, though it had slowed this year as prices again turned upwards.

Economists said yesterday that rising prices would not have a substantial impact the economy.

Suzuki Hiroshi, an economist at the Business Research Institute for Cambodia, said the effect would largely be limited to creating profit for relatively rich individuals who saved in gold. 

ADDITIONAL REPORTING BLOOMBERG