LONDON — Gold struck a record price above 1,217 dollars on Wednesday as the US currency weakened, cementing the precious metal's surge over the past year as nervy investors seek safe-haven investments.
Gold hit 1,217.23 dollars on the London Bullion Market one day after breaking through the 1,200-dollar barrier for the first time.
After reaching a new high on Wednesday, gold pulled back slightly to trade at 1,207.82 dollars at 1122 GMT.
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 on Wednesday, the euro rose to above 1.51 dollars.
After surging above 1,200 dollars, the market is staring "into the unknown," said VTB Capital commodities analyst Andrey Kryuchenkov.
"Resistance could yet prove to be very strong and we are looking for a sustained push above it to signal gains to 1,230/50 dollars.
"There is little doubt that the market remains bullish and even though we expect trading to subside later this month, the downside is still limited. At the moment we favour little profit-taking," he added.
The price of gold has soared by more than 55 percent in value over the past 12 months.
The yellow metal, whose two main drivers are jewellery and investment buyers, has won favour in the uncertain economic climate which has been fuelled in recent days by Dubai's debt crisis. Gold is traditionally viewed as a safe-haven investment.
"It is a store of value while investors have serious doubts about the global financial system," said CMC Markets analyst Michael Hewson.
"It is something that is not going to lose its value like a currency."
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 dollars 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 meanwhile on Tuesday 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.Copyright © 2009 AFP. All rights reserved