Gold hits record high at 1,245 dollars
Gold smashed its way to fresh record highs above 1,245 dollars on Wednesday, with demand driven by investors seeking shelter from the eurozone debt crisis, analysts said.
The precious metal extended a blistering run in morning deals on the London Bullion Market, soaring to 1,245.07 dollars per ounce at 1055 GMT. It later pulled back to 1,239.45 dollars in afternoon trade.
Heightened concerns about the risk of contagion from Greece's debt woes have attracted fresh inflows of cash into gold, which is widely regarded as a safe bet in times of economic uncertainty.
"The latest record high in gold is being accompanied by responsive rallies in silver and copper amid continued market scepticism with the austerity policies required by Greece," said CMC Markets analyst Ashraf Laidi.
"As long as scepticism with the eurozone plan remains synonymous with buying gold as a safe haven, we do not see any obstacle for 1,300 dollars per ounce before quarter's end."
Markets were buoyed on Monday after the European Union and the International Monetary Fund gave their backing to a 750-billion-euro rescue plan for crisis-hit euro countries aimed at limiting the fallout from Greece.
However, many investors remain unconvinced that the massive scheme will resolve the crisis over levels of sky-high state debt.
"The actions by the EU and IMF and the forming of a new UK government may go some way to dampen volatility," said analyst James Moore at specialist metals website TheBullionDesk.com.
"However, the sheer scale of fiscal deficits facing numerous countries is likely to prompt further diversification ... and should ultimately propel gold to fresh highs."
Traders remain fearful that the Greek crisis could spread to other peripheral eurozone economies, notably Portugal, Ireland, Italy and Spain. That could send further shockwaves through the global financial system.
"Persistent worries that the debt crisis in the eurozone could spill over to other countries -- despite the EU's 750-billion-euro aid package -- and thus contribute to a destabilisation of the financial system are driving investors to the yellow metal," noted Commerzbank analyst Carsten Fritsch.
"Gold should remain in strong demand as a safe haven in times of crisis and the flight to safety should go on."
Prior to this week, the precious metal forged previous record highs late last year on the back of inflationary fears and increasing moves by central banks to diversify assets away from the dollar.
Gold, whose two main drivers are jewellery and investment buyers, is also regarded as a good store of value in times of higher inflation.
Despite the metal's record-breaking run, London-based consultancy Capital Economics predicts that gold will lose its sparkle later this year.
"Unless the government of a major economy actually defaults, or the dollar collapses, we continue to expect gold prices to be back below 1,000 dollars by the end of the year," Capital Economics analyst Julian Jessop said.
"The EU rescue package should be enough to avoid an imminent financial meltdown in the eurozone," he added.
"But the required fiscal tightening will undermine the economic recovery in the region, which should keep the euro weak and dollar strong."
A stronger US unit makes dollar-priced gold more expensive for buyers using weaker currencies and so tends to weigh on demand and prices.
© 2010 AFP