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Nervous investors drive gold futures past US$900

A store employee displays gold figures of mice for sale to celebrate the Year of the Rat at a gold store in Hong Kong yesterday. Gold closed higher in Hong Kong on Friday at US$892.50 an ounce, up US$15.45 from Thursday's close of US$877.05. PHOTO: AP

Gold futures briefly rose above US$900 an ounce -- an all-time high -- before pulling back on Friday as growing worries of a US recession prompted uneasy investors to keep buying the precious metal.

An ounce of gold for February delivery on the New York Mercantile Exchange jumped US$6.50 to US$900.10 in morning trading, an all-time high and a psychologically important milestone. The precious metal later fell on profit-taking but still ended US$4.10 higher to settle at US$897.70 an ounce, a new closing record.

Gold also hit an all-time high of US$897.30 on Thursday.

"It's a reflection of market sentiment: Gold is a hedge against uncertainty and right now it's the best bet," said Carlos Sanchez, a precious metals analyst at CPM Group in New York.

"None of the other investment options look that great and gold does," Sanchez said.

Still, when adjusted for inflation, gold remains well below its all-time high. An ounce of gold at US$875 in 1980 would be worth US$2,115 to US$2,200 today.

Gold has had a meteoric rise the past year -- rising nearly 32 percent -- boosted by a falling US dollar, rising prices for oil and other commodities and increased Middle East instability. Those trends have lifted the metal's appeal as a haven; gold is seen as a safe investment in times of political and economic uncertainty around the world.

Also driving gold higher was US Federal Reserve Chairman Ben Bernanke's pledge on Thursday to cut interest rates to boost the economy, which some fear may be sliding toward recession amid turmoil in the housing and credit markets.

Hedge and pension funds, along with other long-term investors, also flocked to gold as the mortgage and credit crisis in the US intensified.

"The funds are really heavily at play ... The momentum with gold is almost like mania. We keep wondering how high it will go," said Jon Nadler, an analyst with Kitco Bullion Dealers in Montreal.
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