Oil, dol­lar moves push gold to lofty heights

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GOLD fu­tures surged to an all-time high above $US880 ($A1012) an ounce this week as traders bet that re­bound­ing oil prices would boost de­mand for the metal as a safe haven in­vest­ment.

Still, when ad­justed for in­fla­tion, gold re­mains well be­low its all-time high. An ounce of gold at $US875 ($A1006.61) in 1980 would be worth $US2115 ($A2433) to $US2200 ($A2530) to­day.

Gold has soared dur­ing the past year, boosted by ris­ing prices for oil and other com­modi­ties and also by the fall­ing US dol­lar. Those trends have in­creased the metal’s ap­peal as a hedge against in­fla­tion. Gold is also seen as a safe in­vest­ment in times of po­lit­i­cal and eco­nomic un­cer­tainty around the world.

Hedge and pen­sion funds, along with other long-term in­vestors, also flocked to gold as the subprime mort­gage cri­sis in the US in­ten­si­fied. Driv­ing the push to this week’s fresh record was a stream of dis­cour­ag­ing news, in­clud­ing com­ments by Trea­sury Sec­re­tary Henry Paul­son that a cor­rec­tion in the hous­ing mar­ket was ‘‘ in­evitable and nec­es­sary’’.

Also weigh­ing on in­vestors was word that Bear Stearns chief ex­ec­u­tive James Cayne was re­sign­ing un­der pres­sure from share­hold­ers up­set over the firm’s losses. But an­a­lysts were not pre­dict­ing a re­lent­less march higher for gold. They said a cor­rec­tive sell-off could fol­low its spike higher.

‘‘ Gold traders see some re­sis­tance near $US880 ($A1012) and $US890 ($A1023) and are prob­a­bly mind­ful of the large num­ber of long po­si­tions in the mar­ket but that is not stop­ping them from try­ing to test the highly rar­efied air found at th­ese lev­els,’’ Jon Nadler, se­nior an­a­lyst at Kitco Bul­lion Deal­ers, wrote in a note.

As fund in­vestors pour money into the mar­ket, how­ever, de­mand from the re­tail sec­tor and in­di­vid­u­als — who drove gold to its pre­vi­ous record al­most three decades ago — is weaker.

‘‘ They’re not, ap­par­ently, lin­ing up around the block like they did in Jan­uary 1980,’’ Nadler said. ‘‘ I don’t know how much longer the funds are go­ing to see re­wards.’’

Gold ended 2007 up al­most 32 per cent. The re­cent surge in oil prices to $US100 ($A115.04) a bar­rel has helped boost the price of the metal.

An­other ma­jor driver be­hind gold’s ad­vance from less than $US650 an ounce in Jan­uary has been the dol­lar’s pre­cip­i­tous drop against the euro. A cheap dol­lar can make com­modi­ties more at­trac­tive as an al­ter­na­tive in­vest­ment, and can also raise de­mand from for­eign buy­ers as their cur­ren­cies gain strength.

Grow­ing de­mand for gold jew­ellery in In­dia and China has also con­trib­uted to in­creas­ing prices over the past sev­eral years.

The sharp run-up in pre­cious met­als — an ounce of gold cost $US680 in mid-Au­gust — has made jew­ellery more ex­pen­sive over the past few months. AP

All that glitters: Gold is on an up­ward spi­ral

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