Gold poised for new record highs

Thu May 13, 2010 10:07am EDT
 
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By Pratima Desai

LONDON (Reuters) - Gold steadied Thursday, but analysts expect the precious metal to extend gains to new records over coming days as waves of investor money come flooding into the market looking for safety.

In euro and sterling terms, bullion hit a record high as the as investors moved to the yellow metal as a haven from sovereign risk in the euro zone.

Spot gold was bid at $1,236.15 a troy ounce at 1343 GMT (9:43 a.m. EDT) from $1,236.35 an ounce late in New York Wednesday, when it hit a record $1,248.15 on fears that a $1 trillion European rescue package will not solve the euro zone debt crisis.

However, the European Central Bank's commitment to buy euro zone government bonds has dampened gold market sentiment as it cuts chances of sovereign default in the bloc.

But analysts say risk aversion still dominates market psychology and the fact that gold has moved up alongside the dollar only reinforces investor bias toward the precious metal.

"I think we could easily see a new record high before the weekend," said analyst Walter De Wet at Standard Bank, referring to the spot gold price. "But also ...at these levels smaller than usual volumes could push prices higher," he added.

Gold priced in sterling rose to a record high of 840.95 pounds an ounce while euro-priced gold touched an all-time high of 988.92 euros per ounce as the dollar gained versus sterling and the euro.

The U.S. currency extended gains versus the euro, which had fallen to a one-week low, after data showing a decline in weekly   Continued...

<p>Gold bars are displayed at Habib Jewels' boutique in Kuala Lumpur in this September 17, 2009 file photo. REUTERS/Bazuki Muhammad</p>