Gold powered to an all-time high above $1,400 an ounce on Monday, despite a bounce in the dollar, as investors sought an inflation hedge from the Federal Reserve's massive bond-buying programme. Gold has risen almost 6 percent since just before the Federal Reserve detailed its plans last Wednesday to buy $600 billion worth of Treasuries to revive the economy.
Palladium rose 3 percent to break above $700 an ounce for the first time since April 2001, and silver also gained 3 percent to its third consecutive 30-year high on the back of speculative buying after gold's midday rally. "As long as (investors) feel like there is no other recourse except buying precious metals, gold is going to keep going up," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.
In early trade, gold looked set to drop following its largest two-day gain in a year at the end of last week, but remained near record highs even as the dollar rallied against the euro on renewed budget problems in Ireland. Spot gold rose 0.8 percent to $1,406.10 an ounce at 12:31 pm EST (1731 GMT), after setting a record at $1,407. US December gold futures climbed $7.30 an ounce at $1,405.
Underlying support helped lift the metal after comments from World Bank president Robert Zoellick in the Financial Times calling for leading economies to consider readopting a modified global gold standard to guide currency movements, although most analysts deemed it unrealistic. "Gold could potentially play a small role in the overall framework, but I don't think we are in a position to go back to a gold standard," said commodities strategist Nic Brown of Natixis.
"The world economy has moved too far from there and it would need to be one that was built around a more inclusive range of currencies," he said. Zoellick called for a system that "is likely to need to involve the dollar, the euro, the yen, the pound and (yuan) that moves towards internationalisation and then an open capital account."
"I can imagine what he meant was asset inflation as measured by the gold price should be an indicator that should be considered by the central banks when they make their interest-rate decisions," said LBBW analyst Thorsten Proettel. The consensus among precious metals analysts was that the gold market is also simply too small to absorb such demand.
"Unlike the World Bank, we do not believe that a form of the gold standard will return. Very simply, there is not enough gold supply in the world for the metal to perform in this role," said Edel Tully, precious metals strategist at UBS. Evidence of a cooling in investor interest in gold put the price under pressure earlier in the session, with holdings of gold in the SPRD Gold Trust falling.
Silver hit a fresh 30-year peak at $27.63 an ounce and traded up 3.2 percent at $27.47 an ounce, and palladium surged 3.4 percent to $710.72, up for a fourth day in a row, while platinum eased 0.1 percent at $1,764.49 an ounce, marking a second successive day of declines.