Gold Price Hits Record High

The price of gold has hit a new all-time high. The precious metal reached a record high of more than $1,050 an ounce at the close of business yesterday.

It is the third record-setting price in as many days. Last Wednesday the price closed at $1,048.40 per ounce.
The greenback is commonly seen as the world's reserve currency. Low interest rates and the US government's massive economic support package have weakened the dollar, contributing to the high price in the metal.

Those who would typically have invested in that currency are looking for other places to put their money where it will, they hope, gain value.

A lot of the investment into gold is coming from institutions such as hedge funds - whose money needs to go somewhere.
When banks are offering very low rates of interest on savings - and money can be borrowed extremely cheaply - gold becomes attractive, observers say.

Gold is seen as a hedge against inflation. Right now, inflation is pretty low, but mounting worries about potential inflation in 2010 may be enticing more investors to the precious metal.

Gold has a "primeval" quality argues Adrian Ash of UK online gold exchange, BullionVault.com (which makes its money when customers buy and sell gold).

He says that while it is essentially a "lump of metal with little purpose", gold tends to hold its value over the long term and is not anchored to the value of cash.

This means that people are drawn to it in uncertain times, Mr Ash adds, though he cautions the price can be volatile.
In Western cultures, individuals buying into gold as an investment remains relatively rare. It is not the kind of advice you are likely to get from a financial adviser, for example.

However, in countries such as China and India, buying gold as in investment is more common. And at this time of year, in the run-up to the Diwali festival, there is a seasonal increase in gold purchases because the metal is traditionally given as a gift.

Indian farmers are also big gold customers at this time of year - seeing it as a way of keep their profits safe after harvest - free from threat of currency fluctuations.