Gold rose to a record Monday in London and New York as traders anticipated that demand for the industrial metal will increase because of China's decision to ease its currency policy.
China, the world’s third-largest economy, said over the weekend it will allow the yuan to gradually appreciate against the dollar. That could help spur demand for commodities since they are priced in dollars, making them relatively cheaper to foreign buyers such as China when the dollar weakens. China is also a major importer of raw materials like copper.
Gold for immediate delivery added as much as $8.50, or 0.7 percent, to $1,265.30 an ounce and traded at $1,261.05 Monday afternoon in London.
It surpassed the previous all-time high of $1,262.50 set June 18. Gold for August delivery hit an intraday record high of $1,266.50 an ounce before settling down $17.60 at $1,240.70 an ounce.
“Gold is benefiting from other commodities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London, told Bloomberg. The China news “is a catalyst, a trigger for buying. People are still worried about sovereign debt levels.”
Gold, up 15 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920, Bloomberg reported. Bullion has outperformed other commodities as global equities slipped, and this month reached all-time highs in euros, sterling and Swiss francs, Bloomberg reported.
A combination of persistent concerns over euro zone sovereign debt levels and the stability of the global financial system, the threat of rising inflation in years to come and low interest rates all indicate a positive outlook for bullion.
"We expect (gold) will continue to trade inversely to equities as gold continues to be seen as a safe-haven against ongoing debt default and inflation concerns, with the metal to continue trading broadly sideways to higher," James Moore, an analyst at TheBullionDesk.com, told Reuters.
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