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Gold eyes record

Gold looks set to test its all time record of $850 an ounce, after getting off to a strong start in New Year trading.

The yellow precious metal sprang to action this morning and by 13:18 was trading $10.55/oz firmer at $843.85 an ounce. Shrugging off the price volatility seen in the last few days of 2007 trade, gold continued to cash in on unceasing geopolitical tensions, flaring oil prices and dollar weakness. Gold closed last year 31.5% higher - its sixth consecutive year of positive returns and consequently, the longest gold-price rally in history. By comparison, platinum closed the year 36.8% firmer, while silver and palladium performed less well on weakening fundamentals, but still posted gains of 14.4% and 12.6% respectively. And investors are expected to continue fleeing to gold as they fear political repercussions from last week’s assassination of Pakistani opposition leader Benazir Bhutto. (see article)

“If there is one thing that investors loathe, it is an explosive geopolitical environment,” Jon Nadler, senior analyst at Kitco Bullion Dealers, was quoted by MarketWatch as saying. “One can always hedge against risk in one fashion or another, but try hedging against uncertainty,” Nadler said. Bhutto’s death has forced Pakistan to delay its elections, which were scheduled for next week. Pakistani Election Commission spokesman Kanwar Dilshad yesterday said it "looks impossible" to hold the election on January 8 as scheduled because of the violence and rioting that followed Bhutto’s assassination. Opposition parties, including Bhutto’s party, have pushed for the election to be held on time and the delay, most likely to February, has sparked public anger against the country’s ruling party and threats of more protest.

“Trade is likely to remain quite volatile over the next few weeks, particularly as the various hedge funds and commodity indexes begin their reallocation process, however with little improvement in the geo-political picture, and with the credit market still finely balanced we expect that gold will remain well supported in the year ahead, and should easily eclipse its current $850/oz high very early on,” said TheBullionDesk analyst James Moore in his London Bullion Report. Standard Bank said spot gold could even set new records in the coming year given concerns for increased inflationary pressures and global security tensions as well as a still weak outlook for the US dollar. “While the $1,000 level may seem to be a rather formidable barrier, it represents only a 20% appreciation in current value,” the bank was quoted by Dow Jones Newswires as stating. (The Times)