Gold price hits record as investors shy away from euro
Metals like gold and silver have become a core holding for more investors as they focus on the risks that lie in sovereign balance sheets. The gold price was as high as $1,245.80 per ounce Wednesday.
Gold surged to a record price on Wednesday, as investors rushed to hedge against possible erosion in key currencies such as the euro.Skip to next paragraph
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The metal has gained as a debt crisis in Europe has pushed the euro down by nearly 8 percent in the past month against the US dollar. Although strength in the dollar is often bad for gold, many investors are wary of America's fast-rising public debt, as well as Europe's.
"Gold prices are soaring because of growing inflation fears," Peter Morici, a University of Maryland economist, wrote in a report Wednesday. "Both the European Central Bank and the Federal Reserve seem to be on the path to permanently easy money with the Greek bailout and huge US budget deficits."
Gold may not quite be the "new black" in fashion, but it has reasserted itself this week as the most basic currency unit known to the world.
It's a haven in times of financial or geopolitical crisis. The US dollar also vies for that role, and in the past year, economists speculated that the euro would rival the dollar as a reserve currency. But now, with investors focusing on the risks that lie in sovereign balance sheets, metals like gold and silver have become a core holding for more investors.
Gold traded as high as $1,245.80 per ounce Wednesday, and contracts for June delivery settled at $1,243.10 an ounce, according to financial news services.
Some metals analysts predict a continued rise in gold, while others say the metal is near a peak.
Much of the debate centers around the economy and inflation. A strong economic recovery could buoy commodities in general, including gold. (Merrill Lynch sees oil going above $100 a barrel next year.) Inflation, by eroding the purchasing power of a currency, can send investors fleeing to gold or other hard assets.