NEW YORK/LONDON (Reuters) - Gold hit record highs above $1,200 an ounce on Tuesday as investors bought the precious metal as an alternative investment amid dollar weakness and economic uncertainty after the Dubai credit woes.
Strength in gold lifted other precious metals, with silver and palladium rallying to their strongest level since July 2008, and platinum hitting its highest since August last year.
Bullion has risen 15 percent since the start of November. So far this year it has gained 36 percent on a combination of worries about paper currency depreciation, inflation and doubts about a nascent economic recovery.
“It is like a perfect storm for gold, with the currency situation, and with Dubai rekindled the concerns about economic crisis,” said Bill O’Neill, partner of LOGIC Advisors.
Spot gold hit a record of $1,201.40 an ounce, and was at $1,195.50 an ounce at 3:38 p.m. EST, against $1,179.10 late in New York on Monday.
U.S. February gold settled up $17.90, or 1.5 percent, at $1,200.20 an ounce on the COMEX division of NYMEX.
The dollar fell against a basket of six other currencies .DXY on Tuesday as waning worries about Dubai’s debt, Australia’s interest rate hike, and upbeat euro zone data dimmed the greenback’s safe-haven appeal.
Weakness in the U.S. unit boosts gold’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Ole Hansen, senior manager at Saxo Bank, said investors had been encouraged by the strength of gold’s recovery after it fell below $1,140 an ounce last week, with the fall being met with strong fund buying.
“Everyone was waiting for that correction, and the way gold recovered suggested there was a lot of buying lurking in the wings (among) people who missed the opportunity to get into the market in the first place,” said Hansen.
Significant downside risks to the price were unlikely to be seen before January, said Michael Lewis, head of commodities research at Deutsche Bank, with seasonal factors affecting the dollar likely to drive gold higher in the short term.
BARRICK COMPLETES DE-HEDGING
The world’s biggest gold miner, Barrick Gold Corp (ABX.TO), said it had completed the elimination of all of its gold hedges as planned. De-hedging has represented a significant source of demand in recent years.
In the physical market, the largest gold exchange-traded fund, the SPDR Gold Trust, said its holdings rose 2.134 tons to nearly 1,130 tons on Monday.
Analysts said the gold market should keep finding support from fund and investment demand along with buying from central banks.
News in early November that India’s central bank had bought 200 tons of gold, followed by acquisitions by Russia, Sri Lanka and Mauritius, sparked a 13 percent price rise that month.
Among other precious metals, spot silver was at $19.03 an ounce against $18.45, having earlier hit a high of $19.24, its highest price since July 2008. Platinum was at $1,476 an ounce against $1,452.
Palladium meanwhile rose 5 percent to its highest level since July 2008 at $384 an ounce, and was last at $378.50, against $363.50. Dollar weakness and gains in other precious metals are lifting investment interest in palladium.
Reporting by Frank Tang; Editing by David Gregorio