Gold futures extended their record highs Friday amid fresh worries about the European banking system, global currencies and talk of further easing of monetary policy to give a jump-start to the sluggish US economic recovery. The most-actively traded gold contract, for December delivery, rose $3.70, or 0.3 percent, to settle at a record $1,277.50 a troy ounce on the Comex division of the New York Mercantile Exchange. In electronic trading overnight, it hit $1,284.40, the highest-ever intraday peak for a most-active contract. “Gold is making a new high and stocks are rallying because the markets think the Fed will print more money before the end of this year just to ensure that the US economy remains on an even keel,” said analyst Neil MacKinnon at VTB Capital. “The risk for investors is that the US economy does actually fall into a ‘double-dip' (recession) and not the ‘soft landing scenario' which the markets are currently discounting,” he said. The euro fell on reports that fiscally stressed Ireland could eventually ask for a lifeline, a charge later denied by Irish officials and the International Monetary Fund. Worries about Europe's sovereign debt have been a key driver in gold's price rise. Because the metal isn't as linked to economic cycles as more industrial commodities like copper and oil, it is often bought as a “safe-haven” asset when investors are worried about the economy or the stock market. Gold closed at 1,281.50-,282.50 US dollars an ounce in Hong Kong on Friday, after breaking through the 1,280 barrier as traders snapped up the safe-haven asset. “Traditionally we see investors flocking to gold in times of market troubles, but this relationship is out the window this week as inflation concerns, expectations for further quantitative easing from the Federal Reserve and technical triggers have driven” up the metal, said analysts at the trading group Spead Co. Meanwhile, the dollar traded in a tight range against the yen, holding onto its sharp gains from Wednesday's massive Y2 trillion intervention by Japan. With investors reluctant to buy the yen for fear of further intervention to push it lower, some who would be buying the Japanese currency as a refuge investment are turning to gold. “It's kind of a theme of uneasiness that's bringing slow, steady buying into gold,” said Michael Gross, broker and futures analyst with OptionsSellers.com. Gold has also been supported by continued talk of the US government initiating another round of economy-stimulating asset purchases, referred to as quantitative easing. Some see that move weakening the dollar and potentially fostering inflation over the long term, which would boost gold as an inflation hedge. A weaker dollar would also likely buoy gold prices by making the dollar-denominated metal less expensive for buyers using other currencies, helping demand. Concerns of inflation have been floating around the market since the Federal Reserve engaged its response to the 2008 financial crisis, but consumer prices overall haven't risen substantially.
