Dec 1, 2009
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Gold scores record high near 1,200 dollars

Dec 1, 2009

LONDON, Dec 1, 2009 (AFP) - Gold prices soared to a record pinnacle close to 1,200 dollars an ounce here on Tuesday 1 December, as demand for the precious metal was boosted by the weak US currency and a host of other factors, analysts said.

The glamorous metal struck 1,199.49 dollars per ounce at 0905 GMT on the London Bullion Market, after reaching a series of historic peaks in recent days and weeks.

"As ever, another painful week for the US currency saw new highs for gold with the market's impressive advance stalling only a tick away from 1,200 dollars per ounce," said VTB Capital analyst Andrey Kryuchenkov.

He added that most gold traders regarded 1,200 dollars per ounce as a "done deal".

In recent weeks, gold has smashed record after record on the back of the weak dollar, inflationary fears and increasing moves by central banks to diversify assets away from the greenback.

The yellow metal, whose two main drivers are jewellery and investment buyers, has also won favour amid the uncertain economic climate and fears of a mounting Dubai debt crisis. Gold is seen by many investors as a safe-haven.

"Gold continues to benefit from an almost 'perfect storm' of weak currencies, minimal interest rates, fears about future inflation and fears about financial stability," added Capital Spreads analyst Simon Denham.

"None of these worries looks like going away any time soon and so the march higher goes on."

The weaker US currency makes gold cheaper for buyers using stronger currencies, which tends to stimulate demand and lift prices.

Tuesday (1 December)'s latest record peak beat the previous high of 1,195.13 dollars that was hit last Thursday (26 November) after a purchase of IMF gold by Sri Lanka's central bank.

The International Monetary Fund (IMF) had announced it had sold 10 tonnes of gold to Sri Lanka's central bank for 375 million dollars as part of a restructuring of its financial resources.

The record run also came after last week's newspaper report that India was mulling the purchase of more IMF gold reserves.

"The overall sentiment on gold remains bullish, also spurred by rumours last week that India was ready to buy more IMF gold, according to an article in India's Financial Chronicle," Kryuchenkov said.

"The IMF declined to comment when asked by the media and we do believe it is just pure speculation at the moment."

He added: "Sri Lanka bought 10 tonnes of the precious metal, also helping to stir up positive vibes yet again.

"Granted, it was not much, but this was nevertheless supportive with increasing rhetoric over central bank diversifications and US inflation expectations still running high as we go into 2010."by Roland Jackson

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