INTERNATIONAL. Gold prices rose to a 3-month high Friday topping US$900 in both London and New York on buying linked to investor concern over the faltering world economy.

Gold futures for February delivery surged US$37, or 4.3%, to US$895.80 an ounce on the Comex division of the New York Mercantile Exchange, the biggest gain since 10 December. Earlier, the price reached US$903.80, the highest for a most- active contract since 10 October.

The US Dollar also continued to gain, reaching a 6-week high vs. the Euro, as investors worried about the outlook for the euro zone economy, and fresh 23-year highs vs. the Pound. Bloomberg reports that Morgan Stanley forecasts the pound will weaken to US$1.30 and reach parity with the euro by end-June.

Meanwhile,the Reuters-Jefferies CRB index which tracks commodity prices across 19 mostly US traded futures markets, was up 2% to a near 2-week high.

"The [current] lack of flow and liquidity in the Gold Market means that a million ounces of inflows now is two or three times as significant as a few months ago," says UBS analyst John Reade, quoted by the Financial Times.

Gold prices usually rise when the dollar is weak, prompting investors to consider the precious metal as an alternative. But worries about the health of the US and European banking sectors amid the recession has become a more dominant factor of late in trading gold, analysts said.

"Clearly there is investment money flooding in due to the perceived security of gold," agrees John Meyer, analyst at Fairfax investment bank in Mayfair, speaking to Reuters.

"The relationship between Gold and the US Dollar appears to be broken at present. Normally a stronger Dollar pushes down gold."

But while Gold Investment in the G7 economies continues to surge, however, "the temperature across the traditional physical [demand] hubs has cooled considerably," notes London-dealer Mitsui in its latest Refining Monitor.

"The level of optimism amongst the refining community is the lowest since June last year," Mitsui goes on, noting the 81% collapse in Indian Gold Imports during December.

Unlike investors, India's consumer gold market – the world's hungriest for physical gold – "not only shuns high prices but also volatile trading ranges," the Monitor says.

"There is no doubt that the investment arena is the driving force behind the direction of the current Gold Price."