LONDON, April 15: The price of gold reached a record high above $1,480 on Friday with investors piling into the safe-haven precious metal as global inflation spiked higher and eurozone debt worries resurfaced.
Gold hit $1,483.38 an ounce on the London Bullion Market, building on a series of records through the week.
“It seems investors are still more concerned about the threat of debt-default by peripheral EU nations and rising inflation indicators following higher-than-forecast inflation readings
from India and China,” said James Moore, analyst at research group Fast Markets.
The record came after China said its inflation hit a 32-month high, suggesting Beijing’s efforts to rein in soaring costs are still falling short.
The consumer price index rose 5.4 per cent year-on-year in March — the fastest pace since July 2008 and well above Beijing’s 2011 target of four percent — and 5.0 percent in the first quarter.
The market has been reacting to (the credit issues in peripheral Europe) by looking for ways to protect themselves from these types of risks, and gold is seen as a way to do that, said Deutsche Bank analyst Daniel Brebner.
He said the main impact on gold of elevated debt levels in Portugal, Greece, Ireland and Spain came from the ways in which euro zone authorities addressed the issue.
Do we see a bailout, do we see more money being extended into these countries, do we see monetary accommodation remaining very much the bias in Europe? he said.
If that’s the case, that should be very supportive of gold markets. European shares dipped after the downgrade, while the cost of insuring against a default by Greece and Ireland rose on growing speculation Greece will eventually have to restructure its debt and after the Moody’s downgrade.
Among other commodities, oil prices eased as the dollar firmed, although they remain near multi-year highs as fighting in Libya continues, supporting fears output could be hit.
Stronger oil prices also tend to benefit gold prices.
Goldman Sachs recommended investors go underweight commodities over a three to six month horizon, echoing its call from Monday, saying oil prices are higher than justified by current supply and demand. But gold prices look set to remain firmly underpinned.
The bullion market has found support one day from economic uncertainty and changes in risk sentiment, and on another day by high oil and food prices, and on yet another by sovereign risk and fiscal concerns, said HSBC analyst Jim Steel in a note.
Elsewhere, shares in some North American silver miners fell sharply overnight after Bolivia’s leftist government said it might rescind concessions on four mines in the country run by Glencore International Ltd affiliates and Canada’s Pan American Silver Corp.
Bolivia was the world’s sixth-largest primary silver producer last year, metals consultancy GFMS said in a report, with output of 41 tons.
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