Gold hits record, nears $US1000

Article from: Reuters

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GOLD set an historic high above $US975 ($1048) overnight, propelled by speculative buying on the back of record high oil and a lifetime-low US dollar against the euro.

The metal pared gains later as some investors took profits, but market sentiment remained bullish. Silver jumped to a 27-year peak near $US20 an ounce before falling, while palladium surged nearly 4 per cent to its highest in more than six years.

Gold set a record for the third straight day, hitting $US975.90 an ounce before falling to $US971.10/971.85, versus $US968.90/969.70 in New York late on Thursday. It has risen 16 per cent this year on the top of 32 per cent rise in 2007.

"All the newsflow coming out of the US is hugely bullish for the gold market. In the end, what lower interest rates mean is that it will be difficult for the dollar to come back strongly," said Michael Widmer, analyst at Lehman Brothers.

"Inflationary pressures are something that are also playing into the market. Fundamentals are strong and I think $US1000 would not be an end. We are going to go higher from there."

The US dollar lingered near record lows against a basket of major currencies, pressured by concerns about the US economy and expectations of further aggressive interest rate cuts.

A report indicating that US core inflation, which the Federal Reserve watches, matched economists' median forecasts had little impact on investor expectations for rate moves. Core prices strip out volatile food and energy costs.

A rate cut tends to weaken the dollar as investors shift assets for better returns. A weaker US dollar makes gold cheaper for other currency holders and lifts metal demand. Gold is also seen as a hedge against oil-led inflation.

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