The price of gold rose to a fresh 25-year high in Asian trading yesterday as investors flocked to the metal as a safe haven amid a weakening US dollar and jitters over Iran's confrontation with the West.
In electronic trading on the New York Mercantile Exchange, June gold futures rose US$705.30 an ounce (US$24.88 a gram), the highest since September 1980 and up from its settlement Tuesday at US$701.50 an ounce. Futures had climbed as high as US$702.20 in New York Tuesday. Spot gold was trading at US$702.90 an ounce.
Investors have snapped up the metal, considered a hedge against currency weakness, inflation and financial instability, after a recent tumble in the US dollar, which has fallen into the ¥111 level from ¥117 late last month.
Gold also has gained on anxiety over Iran's nuclear program, which the US and other nations fear is a cover to develop nuclear weapons. The UN has threatened to impose sanctions on Iran if it doesn't give up its nuclear program.
"Concerns about the whole Iran-US problem and potential conflict there and/or lower supplies of oil out of Iran if it has sanctions imposed on it" are driving up the price, said James Thurtell, a commodities strategist at the Commonwealth Bank of Australia.
Thurtell believes gold may go as high as US$800 an ounce by year's end.
A drop in the dollar is also a factor as "people think that perhaps the US rate hike cycle is drawing to a close," he said.
The general strength of the commodities market, with gains in metals such as silver and platinum, is also lifting gold prices.
In China, a leading domestic industry publication, China Gold News, suggested that the country quadruple its gold reserves in order to better balance its foreign exchange reserves, which are now overwhelmingly held in US dollars, mostly Treasuries.
China Gold News said yesterday that the country should raise its gold reserves to around 2,500 tonnes from 600 tonnes currently.
The report said bullion reserves account for 1.3 percent of China's foreign exchange reserves, less than 3 percent to 5 percent seen in other countries.
The all-time record for gold was set in January 1980 when the metal hit US$875 an ounce in a huge day-and-a-half surge. But it quickly fell back under US$700.