THE spot gold price is likely to break through $1,000/oz imminently after the April futures price in New York on Thursday hit that level for the first time ever.
A spot price of $1,250 is not out of the question in the shorter term.
Investment has poured into the metal as an alternative haven as the dollar plumbed record lows against the euro, 12-year lows against the yen and investors’ concerns about the health of the US economy deepen.
“The financial system's in trouble at the moment and people are going to the safety of gold,'' Mario Innecco, a futures broker at MF Global Ltd. in London told Bloomberg. “You can't create gold so easily as you can create dollars or euros or pounds.”
Not only that, but crude oil price are at record highs around $110 a barrel, which is stoking fears of inflation.
“$1,250 is not out of the question,” VM Group’s Matthew Turner told Miningmx. “This is dependent on external factors. If there were signs that the financial crisis was easing, the gold price would probably come down quite quickly as well.”
The spot gold price hit an all-time high of $997.50 in London trade.
“The weak dollar is the primary reason,” Turner said. “The dollar is at an all-time low against the euro and more importantly it looks like it’s going to go lower.”
“The reason is that news on the US economy is grim and getting grimmer. The Federal Reserve has tried twice in the past two weeks to make major interventions in the market and it doesn’t seem to have had much of a stabilising effect,” he said.
"People have realised that the central banks are going to have to ignore the inflationary risks to rescue the banking system," Sean Corrigan, chief investment strategist at Diapason Commodities, told Reuters.
Edward Meir, an analyst at MF Global, said in a research note: "Judging from yesterday's action in a variety of commodities, the thinking is that the Fed is going to jettison both the dollar and its concern about keeping inflation contained, and opt instead for lowering rates aggressively in an attempt to keep growth from collapsing altogether."
The dollar hit record lows against the dollar on news that a Carlyle Group fund moved closer to collapse, Bloomberg reported on Thursday.
US interest rates will be cut further, weakening the dollar and equities and housing prices are seen falling, pushing investment money into the cliche'd safe haven of gold.
“It’s a cliche' but at the moment that cliche' is true,” Turner said, adding there had appeared to be a step change around August last year in how gold was viewed.
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