Gold continues to set price records
Updated on 03 January 2008
The price of gold is continuing its record-breaking run as investors worry about a weak dollar and tensions around the world.
Prices broke through the 850 US dollars mark on Wednesday in New York - a level last reached in 1980 - and powered onwards in the London spot market on Thursday. They reached a new high of 866.9 US dollars an ounce before settling back to just over 866 US dollars by lunchtime.
Analysts said the precious metal was benefiting from a "cocktail" of favourable conditions including a weak dollar, fears of a US recession and the lure of a safe haven amid a series of political crises worldwide.
And with no sign of those abating just yet, one leading forecaster has predicted the price could smash through the 1,000 US dollars an ounce barrier this year. That could put pressure on the cost of bangles and rings on the high street as retailers keep up with the cost.
Gold forecaster Ross Norman, director of TheBullionDesk.com, said gold spot prices could even spike to 1,200 US dollars during 2008.
He said: "Gold is benefiting from a cocktail of things at the moment - geopolitical tension, the weak dollar and easier access for traders. The metal's supply and demand fundamentals are also extremely positive. Despite the seven-year bull run, gold production is falling and is now at its lowest level since the early 1930s."
Annual gold production is around 2,000 tonnes, with South Africa the biggest producer.Gold trading has become more accessible in the past 18 months, he said, with the metal now being bought and sold through the London Stock Exchange.
Two years ago, gold was selling for less than 550 US dollars an ounce. The soaring price appeared to be already be working its way through to retailers - with shares in H Samuel jewellery retailer Signet down more than 6%.
Julian Jessop, chief international economist at Capital Economics, sounded a note of caution over the soaring gold price. He said the current rally was essentially a play on dollar weakness, and there was evidence that prices above 800 US dollars would be a serious constraint on demand from the jewellery market, particularly in India.
Mr Jessop added: "The last time that gold prices reached these sorts of heights (in January 1980) they also soon collapsed - falling by some 200 US dollars within two weeks."
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