Source: Reuters
London— Gold scaled new 24-1/2-year peaks on Wednesday as more investors scrambled to get a piece of the action, with the market so far shrugging off growing unease that the latest move may be overdone.
Gold touched new highs in other currencies, while silver tracked gold and made strong advances, dealers said.
"The general feeling of insecurity has been pushing many people to re-allocate parts of their assets into gold and that has been feeding the trend," said Frederic Panizzutti, analyst with Swiss-based MKS Finance.
Spot gold hit a 24-year high at $516.30 earlier and at last check was at $513.90/514.70 an ounce, above Tuesday's New York close at $510.50/1.30.
Some analysts were now looking for gold to target $520/25 in the short term, but a key objective was emerging at $550.
"The whole development is still driven mainly by the funds in the United States. It's not just the buying…it seems to also be a lack of selling. People who have it are tending to wait," one trader said.
Gold has surged as investors switch from traditional financial securities such as shares and bonds into gold and other commodities for bigger returns and on fears about inflation and economic growth.
Prices have gained 17 percent so far this year and have doubled in about five years.
Many traders and analysts said the market was getting increasingly stretched, but few felt confident to predict if or when a correction would start, nor its amplitude.
At the New York Mercantile Exchange's COMEX division, February delivery gold closed at $517.80 an ounce, up $4. The day's peak at $520.30 marked the highest for benchmark futures since April 1981.
"For the moment the path of least resistance is up," said George Gero, vice president at RBC Capital Markets Global Futures in New York.
"There was some profit taking this morning when it got below $515, and then it came right back," Gero said.
Overcooked
"When this sentiment-driven rally finally comes to an end, the pull-back we are going to see is going to be aggressive," said Simon Weeks, director of precious metals at ScotiaMocatta.
"We are probably going to have a $25-$30 move on the downside when this sort of sentiment-bubble finally bursts," he added.
Several price chart analysts contacted by Reuters on Wednesday said dips should be seen as a buying opportunity for those who missed the boat earlier.
"If you are a long-term value person, you'll be looking to buy dips and if you see it down around the $470 level, it's kind of like the equivalent to buy crude oil below $50 a barrel," said Jason Perl, global head of technical strategy at UBS.
Bulls dominate for now
Plans by some central banks to possibly look to increase their reserves have also lifted prices.
Russia, Argentina and South Africa have expressed interest in increasing their gold holdings, although European central banks who are signatories of the Central Banks Gold Agreement have so far sold over 100 tonnes since September.
Gold rose to a record high in euro terms at 440.53 euros. In terms of the pound, gold neared 300 sterling, its highest in about two decades.
Analysts said the rally had been partly fuelled by Japanese buyers, who had invested heavily in bullion.
Silver has followed gold and risen 38 percent in 2005.
Spot spiked to $8.86 an ounce, its highest in more than 18 years, and was last quoted at $8.77/80, against $8.68/8.71 late in New York.
"It has rallied significantly without pretty much any retracement whatsoever…but I think certainly $9 is quite feasible," Perl said.
Platinum was at $991/996 an ounce, up from $987/990 late in New York. On Monday platinum rose to $1,006, its highest since March 1980.
Palladium was at $274/278, versus $271.50/274.50.
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