London: Gold hit record highs at $1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices, with funds lengthening positions due to expectations for a fresh leg of dollar weakness and more central bank buying.
The metal also reached all-time highs in euro and sterling terms, according to Reuters data, indicating independent gold strength. Spot gold was bid at $1,213.20 an ounce at 3:17pm, against $1,196.00 late in New York on Tuesday.
US gold futures also hit a record at $1,218.40 an ounce. Gold for December delivery on the COMEX division of the New York Mercantile Exchange was later up $14.40 at $1,214.60.
The dollar edged up slightly against the euro on Wednesday, but analysts say with US interest rates likely to remain depressed and risk appetite improving, the US currency is set for further losses.
“Investors are sailing out of the safe havens into more risky assets, and this is weakening the U.S. dollar,” said Peter Fertig, a consultant at Quantitative Commodity Research.
“The fact that stock markets are performing better and we have weakness in the US dollar are supportive for precious metals, and from that perspective I believe this rally remains sustainable.”
Investment interest in gold remained firm, with the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, saying its holdings rose 0.61 tonnes or 0.05% to 1,130.604 tonnes on Tuesday.
The holdings are approaching a record marked in June of 1,134.03 tonnes. Gold also hit record highs in sterling terms and when priced in the euro.
Traders are looking ahead to key US data due later in the week for its influence on currencies and the wider markets. “The market is focusing on Friday’s non-farm payroll and other data from the US and any good news from west Asia ... and then of course the US dollar,” Ronald Leung, director of Hong Kong’s Lee Cheong Gold Dealers, said.
Demand is buoyed by persistent hopes for central banks to diversify reserves, particularly China, after a report that India could buy more of the gold being sold by the International Monetary Fund.
After India’s first purchase of 200 tonnes in November, central banks in Mauritius, Russia and Sri Lanka also bought gold.
The world’s biggest gold miner, Barrick Gold Corp, said on Tuesday it had completed the elimination of all of its gold hedge-selling positions as planned.
De-hedging has represented a significant source of demand in recent years. The rate at which gold miners cut their hedging positions rose to 3.18 million ounces in the third quarter, up from 980,000 oz in the second, driven by Barrick’s decision to eliminate its entire hedge book, Societe Generale and metals consultancy GFMS Ltd said in a quarterly report.
The sharp reduction left the global gold hedge book at 11.55 million ounces, the report said, adding there had not been strong signs of a return to outright hedging to lock in historically high prices.
Strength in gold has lifted other precious metals, with silver and palladium rallying to their strongest levels since July 2008.