The price of gold hit a record high on Friday, going above 900 dollars an ounce for the first time ever in New York. It was driven up by hopes of a half-point cut in US interest rates later this month following comments by Fed Chairman Ben Bernanke. That would weaken the value of the dollar and increase the precious metal’s appeal as an alternative investment.
In 1980 gold hit 850 dollars an ounce as the Iranian revolution pushed up oil prices dramatically. Then it fell out of favour before starting to climb again last year.
One reason for the rise is that investors outside the US get a better deal as their currencies have gained against the dollar. NYMEX trader Lou Grasso, explained: “It looks to them as if gold is getting cheaper, because it’s priced in dollars and the dollar is weaker, their currency is stronger. So it’s a way to maintain your buying power; if you go in and you buy gold and the dollar goes down, gold will maintain that buying power for you.”
Analysts said the outlook for the gold market is probably the best it has been in 30 years. Against a background of uncertainty in the US credit and housing markets and falling gold production they are confident that the price will break through 1,000 dollars an ounce this year and said it could reach 2,000 dollars.