Gold fever took prices as high as $530.40 an ounce for the first time in nearly a quarter of a century on Friday as investors, particularly in Asia, rushed to buy an asset that has gained over 16 percent in the past month.
“This buying is just more of the same of what we have been seeing. I suspect also that it may be central bank buying that is supporting it on the dips,” Paul Merrick of RBC Capital Markets said.
“Gold’s rally seems relentless and it feels as if it wants to continue higher” despite prices standing at technically overbought levels, said James Moore, an analyst at TheBullionDesk.com.
Spot gold closed at $527 an ounce on the New York Mercantile Exchange, up $7.70 an ounce from Thursday's close. The metal has soared roughly $75, or 16.4 percent, since Nov. 7.
Gold’s tight supply, strong global demand, worries about inflation and growing fund interest in precious metals and other commodities have unleashed a wave of speculative buying, defying warnings that the market was overbought.
“The activity in the bullion market remains very impressive, with aggressive buying of any dips and a dearth of selling in the rallies helping to create a bullish chart pattern of higher lows and higher highs, thereby attracting more momentum-based fund buying,” Alan Williamson of HSBC said.
Fund managers were buying as part of a strategy to diversify portfolios, while some investors were speculating about potential purchases from some of the word’s central banks — previously long-time sellers.
“I strongly believe that Asia and China are buying — but we will not know until they’ve finished buying or are close to it, for sure,” said Juerg Kiener, chief investment officer at Singapore-based hedge fund Swiss Asia Capital, referring to central banks in the region.
A spokesman at the China Gold Exchange said: “We have encouraged the Bank of China to buy more gold or, if not, to relax the barriers and allow more Chinese people to do so.”
However, he said he was not aware of the central bank’s policy on the matter.
In November Russia, Argentina and South Africa expressed interest in increasing their gold holdings, even though European central banks have sold more than 100 tons since September.
Other precious metals got caught in gold’s slipstream, with silver hurtling past $9 an ounce to levels last seen more than 17 years ago.
Platinum, at about $1,000 an ounce, this week hit its highest level since 1980.