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
News
ebooksAn unforgettable anthology of contemporary reportage
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

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Rafa Benitez Real Madrid unveiling: New manager full of emotion at Bernabeu homecoming

Benitez full of emotion at Bernabeu homecoming

There were tears in the former Liverpool manager’s eyes as he was unveiled as Real Madrid coach. But the Spaniard knows he must make tough decisions if he is to succeed
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?