Gold Prices Hit Record High
By MATTHEW WALLS
LONDON -- Spot gold jumped to a record high Tuesday as the dollar weakened and worries over Dubai's debt woes eased.
The recovery in risk appetite since Dubai World's debt restructuring announcement last Wednesday continued apace, as the Bank of Japan said it would ease monetary policy and the Reserve Bank of Australia raised interest rates for the third consecutive month.
Spot gold rallied to a high of $1,199.25 per troy ounce, a gain of 1.7% on the day before pulling back.
At 1009 GMT, spot gold was trading at $1,194.30 an ounce.
Comex February gold futures briefly breached $1,200/oz, reaching a high of $1,200.50 before retreating to $1,196.60 an ounce, up 1.2% on the day.
The euro was at $1.5068, versus $1.5005 at 0000 GMT.
"It's probably a combination of what's happening in Japan, and the Dubai World situation seems to have calmed down a little bit," said Mitsubishi Corp. analyst Tom Kendall.
Dubai World Tuesday said it was in talks over $26 billion of its estimated $60 billion debt, easing worries it would default on all of its debt. The Bank of Japan said it will inject more cheap liquidity into the financial system, prompting a rally on the Nikkei.
With investor sentiment having quickly recovered from the Dubai World scare, gold should continue to draw investors seeking a hedge against inflation and a weaker dollar, analysts said.
"The weak dollar helps. After the washout [Friday], everyone's jumping back into commodities," said Commerzbank trader Michael Kempinski. "If we go through $1,200, we could easily go another $20."
Analysts said gold's quick rebound following Friday's 5% plunge has demonstrated the appetite of investors looking to buy gold on dips, making a steep correction unlikely.
Mr. Kendall cautioned that another profit-taking correction may occur in coming weeks, although he said gold's medium-term uptrend is unlikely to be broken, with the bottom likely to be limited to $1,135 an ounce or $1,085 an ounce.
There is still "uncertainty about whether there is the political will to tackle the deficit in the U.S., and people are rightly bearish on the dollar on a medium-term view."
Other precious metals followed gold higher. Spot silver rose 1.25% to $18.68 an ounce, spot platinum was up 1% at $1,464.50 an ounce and spot palladium surged 4% to $377.50 an ounce.
Write to Matthew Walls at matthew.walls@dowjones.com
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