Gold rises to record above $1,400

By Frank Tang

NEW YORK (BestGrowthStock) – 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 6 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 3 percent to break above $700 an ounce for the first time since April 2001, and silver also gained 3 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 readopting 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. (FRX/: )

Spot gold rose 1.1 percent to $1,410.30 an ounce at 2:52 p.m. EST (1952 GMT), after setting a record at $1,409.40.

U.S. December gold futures settled up $5.50 an ounce at $1,403.20, with COMEX open interest surging about 2.5 percent to an all-time high 643,404 lots on Friday.

Underlying support helped lift the metal after Zoellick’s comments, although most analysts deemed it unrealistic.

“Gold could potentially play a small role in the overall framework, but I don’t think we are in a position to go back to a gold standard,” said commodities strategist Nic Brown of Natixis.

“The world economy has moved too far from there and it would need to be one that was built around a more inclusive range of currencies,” he said.

QEII

Many investors see the $600 billion committed by the Fed’s bond-buyback program last week as bigger than initially thought, and they have no choice but to buy precious metals as a hedge against inflation, said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.

“Gold is in uncharted waters, and it is going to keep reacting to fresh money (from the Fed) coming into the market,” Perez-Santalla said.

Top officials at the U.S. Federal Reserve on Monday sounded differing notes on the central bank’s bond-buying program, with one arguing it was an effective way to fight deflation risks and another warning it might need to be curbed.

Silver hit a fresh 30-year peak at $27.65 an ounce and traded up 3.7 percent at $27.61 an ounce, and palladium surged 3.5 percent to $710.72, up for a fourth day in a row, while platinum edged up 0.3 percent at $1,771 an ounce.

(Additional reporting by Amanda Cooper in London, Lewa Pardomuan in Singapore and Siddesh Mayanker in Mumbai; Editing by Lisa Shumaker)

Gold rises to record above $1,400