Gold hits new record high as demand for the dollar continues to weaken

Price hits $1117 as analysts expect further spikes

Gold hit another record high yesterday with investors continuing to buy the precious metal as a hedge against further falls in the US dollar. The new high watermark of $1,117.05 a troy ounce comes after the US dollar slipped for a third consecutive day, registering a 15-month low.

The record comes after months of strong trading with investors seeking a safe haven from fragile equity markets and a historically weak US dollar, caused by low interest rates. Racing ahead over the past month, the closing spot price had risen from $999 on 1 October to hit a previous high of $1,064 on 13 October. Since then, prices had fallen to between $1,055 and $1,060.

In the last year, bullion has jumped more than 23 per cent, with the rally expected to go on into next year given the outlook for continued weakness in the dollar, especially with the US government looking to keep interest rates low in a bid to stimulate the economy. Since Lehman Brothers' collapse last September, gold has risen nearly 50 per cent.

Carsten Fritsch, an analyst at Commerzbank, said the falling US dollar was "providing tailwind", adding: "A further gold price increase has to be expected, especially as short-term-oriented market participants are likely to be jumping on the bandwagon."

Natalie Dempster, the head of investment at the World Gold Council in New York, said that while she was reluctant to predict a gold-price high, demand was still rising. "A number of factors are driving the price rises at the moment," she said.

"Investors are of course using gold as a hedge against the weakening dollar and against concerns that central banks will not remove quantitative easing measures in time, which would lead to inflationary pressures.

"But prices have also been helped by central banks becoming net buyers in the second quarter. China, Russia, and especially India, have reversed a trend where central banks have been sellers of gold for years," Ms Dempster said.

Indeed, as well as the weak US dollar, most analysts attribute the most recent spikes to huge orders from central banks. Last week, India bought 200 tons of gold from the International Monetary Fund, pointing to "the first natural deficit in the gold market for 30 years," according to Leon Esterhuizen, a gold-mining analyst at RBC."It changes the dynamic completely."

Bullion prices have strengthened in the last few months, despite improvements in equity markets. But though several asset classes returned to a semblance of health after suffering in the worst days of the financial crisis, most analysts expect to see gold surging ahead in the coming months.

"Despite the movements in the price over the last year, gold allocations are still very low," said Ms Dempster. "Gold only makes up about 1 per cent of total global assets. There is still ample capacity."

Mr Esterhuizen at RBC is more cautious about longer-term prices, but does expect to see the present rally continuing: "You have the perfect storm at the moment and so there is no reason to think anything should change. Our long-term price prediction is $1,000, but in the next six months or so, we would expect to see $1,200 gold."

The gains have led to a raft of impressive corporate updates. On Monday, Randgold Resources, the FTSE 100's only pure-gold miner, said that while its third-quarter profits were down because of higher-than-expected maintenance costs, it was pressing ahead with several new projects in Africa, partly encouraged by strong bullion prices.

A number of companies have started television advertising campaigns, designed to get consumers to sell unwanted gold jewellery, which can then be resold on the wholesale markets.

Other groups, such as an outfit called OuncesPounds are organising gold parties. The group claims that gold teeth can fetch as much as £500 each.

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy as ECB finally wield the axe
Life and Style
food + drink
Voices
John Profumo and his wife Valerie Robson in 1959
voicesWard committed no crime, and the truth is still being covered up, writes Geoffrey Robertson QC
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas