By Chris Flood
Published: February 21 2008 17:17 | Last updated: February 21 2008 17:17
Gold hit a record $953.60 a troy ounce on Thursday as oil’s move above $100 and inflation fears provided fresh upward momentum.
Fuelling the rally were fears the US economy could be heading for stagflation after the Federal Reserve published forecasts for lower growth and higher inflation.
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Investors expect further US rate cuts to stimulate growth, but worry that easing monetary policy will undermine the battle to control inflation.
Daniel Hynes, metals strategist at Merrill Lynch, pointed to “a multitude” of drivers pushing gold higher.
“But the latest is inflation concerns. We’ve seen money continue to flow into the sector. Every time there is a dip in gold prices, buyers come in aggressively.”
Strong inflows into gold exchange-traded funds have helped gold prices rise 14.4 per cent this year.
“The fight against inflation is being sacrificed in G7 countries to avert the risk of recession and investors are likely to seek gold as an inflation hedge,” said Mandy La Grange of Nomura, who forecasts gold to average $1,000 this year.
Copyright The Financial Times Limited 2008
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