Gold hits record near $1,200/oz

Wednesday, December 02, 2009
LONDON: Gold hit record highs near $1,200 an ounce on Tuesday as dollar weakness fuelled buying of the metal as an alternative asset, while investors speculating on more gains were cheered by its recovery from last week’s losses.

Spot gold hit a peak of $1,198.70 an ounce and was bid at $1,192.15 an ounce at 1506 GMT, against $1,179.10 late in New York on Monday.

Prices could push through the $1,200 an ounce level to new record highs if the dollar continued to weaken, analysts said.

Significant downside risks to the price were unlikely to be seen before January, said Michael Lewis, head of commodities research at Deutsche Bank, with seasonal factors affecting the dollar likely to drive gold higher in the short term.

“We see $1.55 in the euro-dollar, so that is where we think the main catalyst is for new highs for gold,” he said. “There is normally quite a strong seasonal pattern in the dollar, (and that) will be driving a further rally in gold.”

The dollar fell against a basket of six other currencies on Tuesday as waning worries about Dubai’s debt, Australia’s interest rate hike, and upbeat euro zone data dimmed the greenback’s safe-haven appeal.

The dollar also pared gains against the yen after comments from the Bank of Japan on monetary policy.

Weakness in the US unit boosts gold’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.