Spot gold has climbed more than 1.5 per cent to a record high above $1,920, as fears over the worsening eurozone debt crisis and stalled global growth have driven investors into safe havens.
This is the 12th record high that spot gold has reached since the beginning of August, and the rally is expected to continue, with investors unable to see a quick resolution to the eurozone crisis and the global economy at risk of slipping into another recession.
Investors are watching a string of legal and political events in Europe this week that could hurt efforts to resolve the debt crisis, after dispute broke between international lenders and Greece over disappointment that Athens had fallen behind schedule on cutting deficit.
Spot gold stood at $1,919.49 an ounce early this morning. It has risen about 18 per cent since the beginning of August and is up 35 per cent on the year so far.
US gold rallied 2.5 per cent to a record high of $1,923.2, and eased slightly to $1,922.50.
"After we broke above $1,900 people are now looking at $2,000 as the next target," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
Fung said physical demand from India and China, the world's top two gold consumers, remained strong despite lofty prices, and helped keep gold premiums in Hong Kong in the range of $1 to $1.50 an ounce over spot prices.
Financial markets will also closely follow the US ISM non-manufacturing index for August due later in the day.
"If we get a negative reading, it will just reinforce concerns about a global recession and possibility of some form of stimulus from the Fed down the road," said Ong Yi Ling, an analyst at Phillip Futures.
As long as gold holds above $1,700, the bullish trend will persist and prices could hit $2,000 by the end of the year, she added.
City A.M. Reporter