Gold surged to a record high above 1,040 per ounce on Tuesday, with buying fuelled by dollar weakness after a report, later denied, that Gulf Arab states were considering abandoning the US currency for oil trade.
Both spot gold prices and US gold futures have benefited from a convergence of factors including the dollar's decline, technical buying momentum and worries about potential inflation as central banks struggle to emerge from unprecedented fiscal stimulus measures. "In an environment where interest rates are virtually zero, the incremental cost of moving into gold is nil.
It stands to reason for investors that gold is more desirable," said Jack Ablin, chief investment officer at Harris private bank in Chicago. Spot gold hit a historic $1,043.45 per ounce and was last up 2.2 percent at $1,039.55, compared with $1,016.65 quoted late in New York on Monday. US gold futures hit a record high, while the metal also hit six-month highs when priced in sterling and euros, breaking above 700 euros an ounce for the first time since early April.
Peter Fertig, a consultant at Quantitative Commodity Research, said the final quarter was typically strong for gold, due to rising jewellery demand - a weaker than usual factor this year - and as the dollar is seasonally soft. Physical demand for the metal also trickled through. The largest gold exchange-traded fund, New York's SPDR Gold Trust, said its holdings rose 1.5 tonnes on Monday.
Traders said they were also seeing rising demand in India, the largest consumer of gold last year, ahead of the Diwali festival on October 19. Mark Cutifani, chief executive of AngloGold Ashanti, said he saw gold prices at $950-1,100 an ounce in the next 12 months, and they could break $1,100 if the US economy continued to dip and investment demand rises.
The yellow metal's gains helped lift silver to a two-week high of $17.36 an ounce as investors bought it as a cheaper proxy for gold. The precious and industrial metal was later at $17.33 an ounce against $16.59. Palladium hits its highest since August last year at $308.50 against $298.50. Platinum, the precious metal widely used in autocatalyst manufacturing, also benefited from gold's climb, as well as the better appetite for risk demonstrated by rising equity markets. Platinum was at $1,313 an ounce against $1,293.