Gold hit a record high of US$1,235.50 an ounce by midday in Hong Kong yesterday as investors sought a safe haven over deepening concerns about the eurozone debt crisis.
The precious metal closed at US$1,209.00 in Asia on Tuesday, but later climbed as high as US$1,224.82 an ounce in European trading.
Analysts said the commodity was likely to maintain its safe haven role while other markets remained vulnerable.
PHOTO: AFP
It opened at US$1,229.00, just up from a previous record of US$1,226.56 for the metal set on Dec. 3 last year.
“The response of the central banks and the IMF to the southern European mess is almost guaranteed to ensure continued volatility in world markets,” Capital Spreads analyst Simon Denham said.
Investors had on Monday welcomed the EU and IMF aid package worth 750 billion euros (US$1 trillion) to resolve the debt and budget deficit crisis in Europe.
However, the euphoria faded on Tuesday amid resurgent doubts over countries’ ability to reduce their deficits.
“Gold is holding ground ... and with doubts about the effectiveness of the EU/IMF already surfacing, could be poised for a fresh challenge higher to target last year’s all-time high,” analyst James Moore at TheBullionDesk.com said.
The euro continued to be sold as investors became less eager to take risks. The euro was trading at US$1.2624 at 4:50am GMT.
“Investors are removing funds from risky assets into safer haven plays and this is positive for both the US dollar and gold,” City Index analyst Joshua Raymond said. “The EU rescue package has been widely interpreted as not a long-term solution to the deficit woes within the eurozone. With the near-term outlook remaining unstable, investors have sought to transfer their cash into defensive assets.”
The precious metal, whose two main drivers are jewelry and investment buyers, hit record highs last year on the back of inflationary fears and increasing moves by central banks to diversify assets away from the US dollar.
Heightened concerns about Greece have attracted fresh inflows of cash into gold.
“This resilient performance ... is perhaps telling of the skepticism markets still have over the execution of the plans and the tough fiscal challenges that will face some euro area economies,” Barclays Capital analyst Yingxi Yu said. “While markets remain jittery over the effectiveness of the plans, gold is likely to perform relatively well.”
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