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Gold jumps to new heights as dollar dips

City A.M. Reporter
GOLD jumped to another record high yesterday, while the dollar dropped to a 15 month low against a basket of currencies after a batch of US data indicated the economic recovery was strengthening. <br /><br />The data, showing positive trends in the housing and labour markets and in consumer spending, helped lift US and European shares while driving government bond markets lower.<br /><br />Gold hit a record of $1,173.50 an ounce, up almost two per cent from last week&rsquo;s close.&nbsp; Many commodities are traded in dollars so when the dollar weakens it makes the price of commodities more attractive for foreign investors<br /><br />The dollar&rsquo;s drop ahead of today&rsquo;s US Thanksgiving Day also reflected the US Federal Reserve minutes released on Tuesday that voiced increased confidence in the US economic recovery and Russia&rsquo;s announcement it would diversify some foreign exchange reserves into Canadian dollars.<br /><br />Federal Reserve officials said the recent fall in the foreign exchange value of the dollar had been &ldquo;orderly&rdquo;, and appeared to reflect an unwinding of safe-haven demand.<br /><br />The dollar has dropped out of favour with investors as the Federal Reserve continues its policy of keeping interest rates at historical lows in an effort to stimulate the economy.<br /><br />Even so, gold, which is considered a safe-haven in times of uncertainty, was the standout performer of the day as the weak dollar supported commodity prices. <br /><br />Gold was also fuelled by a speculation that India&rsquo;s central bank was interested in buying more gold beyond the 200 tonnes it purchased earlier this month from the International Monetary Fund. <br /><br />Standard Chartered analyst Daniel Smith said:?&ldquo;Most commodities are rallying on the back of the weaker dollar, and that move is potentially quite significant. Gold has been outperforming on the back of this general rally in commodities&rdquo;<br /><br />Spot gold prices rose $20.70, or 1.77 per cent, to a record high of $1190.00. Silver was on track to close at a 16-month high, near $18.81 an ounce.