Gold hits 10th record peak in 12 days

Gold hit its 10th record high in 12 trading days on Wednesday as investors worried that aggressive measures by the Federal Reserve to prop up the US economy could undermine the dollar and spark inflation.

Spot gold hit a record $1,313.20 and was bid at $1,308.65 an ounce at 1443 GMT, against $1,307.40 late in New York on Tuesday. U.S. gold futures for December delivery rose $1.70 an ounce to $1,310.10.

Gold's strength also lifted other precious metals, with silver reaching a fresh 30-year peak, palladium its highest level since March 2008 and platinum a four-month high.

The price of gold has rallied by 5 percent in September, on track for a second month of increases, and while analysts are expecting to see some sort of pull-back, further gains appear to be on the cards.

"Essentially, it feels like we need to consolidate a bit. However, there are a lot of people thinking that, but very few are willing to short the market," said Credit Suisse analyst Tom Kendall.

"It's quite possible that if there are any further upsets in either the currency markets or the rates markets ... we could get another leg higher and then we'd be looking at the next upside target at $1,330," he said.

The dollar fell for a fourth consecutive session to hit a new five-month low against the euro as broadly weak economic data reinforced the belief the Fed could resume its purchases of Treasuries to keep interest rates low.

"Gold is flying because of concerns over a weakening dollar, and the prospect of quantitative easing," said David Wilson, an analyst at Societe Generale. "Our internal house view is for a slight softening of the dollar over the next 3-6 months."

"We are not convinced the European economy is going to be doing particularly well next year either," he added. "It is going to be a kind of competition (to show) who will be worse out of the two."

Buying in India, the world's biggest gold consumer, rose on Wednesday despite the hike in spot prices, as strength in the rupee helped shield local buyers from the rise.

Scrap sales have also slowed after prices retreated from their rupee peak, with sellers waiting for prices to breach the 20,000-rupee level from around 19,100 rupees currently.

Investment interest in gold was also firm, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, climbing just over five tonnes on Tuesday.

Holdings of the largest silver ETF, the iShares Silver Trust, also rose on Tuesday, climbing 143 tonnes to a record high of 9,756 tonnes.

Silver prices responded my marking another 30-year high at $22.00 an ounce, before easing back to $21.81 an ounce against $21.69. Gains in silver are outstripping those of gold.

"The ratio of gold to silver dropped below 60 for the first time in 11 months," said Fairfax analyst John Meyer.

"Silver has outperformed gold since the end of June, gaining 17 percent compared with gold's 5.4 percent climb, as investors bought on the back of the metals relative cheapness."

Palladium was the biggest climber of the precious metals on Wednesday, rising by as much as 2.5 percent to a 2-1/2 year high at $571 an ounce earlier in the day, before slipping back to $566.00 versus $557.15. The autocatalyst metal is rising on hopes demand will improve.

Platinum reached its highest since May at $1,650.50, and was later at $1,647.00 an ounce against $1,631.65.

Follow Emirates 24|7 on Google News.