New York - Gold powered to an all-time high above $1 400 an ounce on Monday, extending its record-breaking rally to a third day, as safe-haven buying prompted by renewed budget problems in Ireland more than offset a sharp dollar bounce.
Gold has risen almost six percent since just before the Federal Reserve detailed its plans last Wednesday to buy $600-billion worth of Treasuries to revive the economy, but the Fed's actions also stoked inflation fears.
Palladium rose three percent to break above $700 an ounce for the first time since April 2001, and silver also gained three percent to its third consecutive 30-year high on the back of speculative buying after gold's midday rally.
On Monday, market anxiety was focused mainly on Ireland.
Although the government is funded until early 2011, a report questioned its ability to cut spending next year, casting doubt on future demand for government debt. The cost of protecting Irish government debt against default rose.
“The bond situation in Ireland was worse than expected, so investors looked to move money into a safe haven, which is gold,” said Michael Daly, gold specialist at futures broker PFGBest.
“People have gotten to the point that they have lost confidence in fiat currencies and they are choosing gold as their currency of choice,” he said. Daly also cited remarks by World Bank President Robert Zoellick that leading economies should consider re-adopting a modified gold standard. Even just a mention of using gold to guide currency movements provided a “great fuel” to the metal's
price, Daly said.
In early trade, gold looked set to drop following sharp gains at the end of last week, but remained near record highs even as the dollar rallied against the euro on renewed sovereign debt worries. - Reuters