Gold hits record high in Asian trade

HONG KONG, May 12, 2010 (AFP) - Gold opened at a record high of 1,228.00-1,229.00 US dollars an ounce in Hong Kong on Wednesday, as investors sought a safe-haven over deepening concerns about the eurozone debt crisis.

The precious metal closed in Asia on Tuesday at 1,208.00-1,209.00 dollars but later climbed as high as 1,224.82 dollars an ounce in European trade.

Analysts said the commodity was likely to maintain its safe haven role while other markets remained vulnerable.

The previous record for the metal was set on December 3 last year when it reached 1,226.56 dollars.

"The response of the central banks and the IMF to the southern European mess is almost guaranteed to ensure continued volatility in world markets," said Capital Spreads analyst Simon Denham.

Investors had on Monday welcomed the European Union and International Monetary Fund aid package worth 750 billion euros (one trillion dollars) to resolve the debt and budget deficit crisis in Europe.

However, the euphoria faded on Tuesday amid resurgent doubts over countries' ability to reduce their deficits.

"Gold is holding ground... and with doubts about the effectiveness of the EU/IMF already surfacing could be poised for a fresh challenge higher to target last year's all-time high," said analyst James Moore at

IMF head Dominique Strauss-Kahn has hailed the trillion-dollar aid package as a big step forward.

However, higher gold prices indicated that traders remain sceptical over the deal, according to analysts.

"Investors are removing funds from risky assets into safer haven plays and this is positive for both the US dollar and gold," said City Index analyst Joshua Raymond.

"The EU rescue package has been widely interpreted as not a long term solution to the deficit woes within the eurozone.

"With the near term outlook remaining unstable, investors have sought to transfer their cash into defensive assets."

The precious metal, whose two main drivers are jewellery and investment buyers, hit record highs last year on the back of inflationary fears and increasing moves by central banks to diversify assets away from the dollar.

Heightened concerns about Greece have attracted fresh inflows of cash into gold.

"This resilient performance... is perhaps telling of the scepticism markets still have over the execution of the plans and the tough fiscal challenges that will face some euro area economies," added Barclays Capital analyst Yingxi Yu.

"While markets remain jittery over the effectiveness of the plans, gold is likely to perform relatively well."

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