Gold price hits record high

LONDON: The price of gold struck a record high level above $1,217 an ounce in trading here today as the US currency weakened against the euro.Gold hit $1,217.23 on the London Bullion Market a day after breaking through the 1,200-dollar barrier for the first time.After reaching a new high today, gold pulled back slightly to trade at $1,214.30.Gold has smashed record after record over recent days and weeks on the back of inflationary fears and increasing moves by

central banks to diversify assets away from the dollar, which has weakened against the European single currency.

A falling greenback makes dollar-denominated gold cheaper for buyers holding stronger currencies, pushing up demand for the metal and eventually its price.

In European foreign exchange trading today, the euro rose to above $1.51. The yellow metal, whose

two main drivers are jewellery

and investment buyers, has also won favour in the uncertain

economic climate which has been fuelled by Dubai’s debt crisis. Gold is traditionally viewed as a safe-haven investment.

After surging above 1,200 dollars, the market is staring “into the unknown,” said VTB Capital commodities analyst Andrey Kryuchenkov.

The price of gold has soared by more than 55 per cent in value over the past 12 months. Gold prices have won support from central bank purchases of the metal.

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

The record run for gold comes also after a recent newspaper report that India was mulling the purchase of more IMF gold reserves.

Canadian mining giant Barrick Gold yesterday announced it had eliminated all of its hedges on the world’s largest gold production and reserves, hoping to profit from rising gold prices.

The gold hedges were contracts whereby Barrick — the world’s number one gold producer — sold gold ounces it expected to produce in advance for a fixed price.

In the meantime, if the price of gold increased, Barrick was obligated to sell its gold at the lower price or buy it in the marketplace at a higher price to meet its contractual obligations.

Hedging is normally used to insulate companies from market price fluctuations and provide a level of financial stability for their operations. Barrick announced in September it would pull the plug on its remaining gold hedges, as it was not benefiting from any increase in the gold price, which is forecast to continue rising over the long term as deposits are depleted.

Meanwhile, in Hong Kong gold closed higher today at $1,213-$1,214 an ounce, up from yesterday’s close of $1,188-$1,189. It opened at $1,206.-$1,207.