Gold soars to record level as dollar weakens

Gold has risen to hit a record $1,498.90 an ounce, with demand fuelled by a declining dollar and concerns following S&P’s outlook downgrade for the US.

Over this year, gold has increased 5.3% while the dollar has fallen 4.8% versus six other currencies including the euro and pound, Bloomberg reports.

S&P yesterday cut its outlook on US sovereign debt for the first time in 70 years, reducing it from stable to negative. This means the US faces a one-third chance of a downgrade from its triple A credit rating in the next two years, calling into question whether US government debt is risk free.

The eurozone sovereign debt crisis is further compounding investor concerns, prompting a flight to perceived safe-haven assets and further portfolio diversification.

However, inflation is also stoking demand for precious metals such as gold and silver, with eurozone inflation rising to 2.7% in March, from 2.4% in February. In the UK, inflation dropped 0.4% but was still double the Bank of England's target at 4%.

The price of oil also remains high with Brent crude at $119.24 per barrel, although it fell 3.3% since Friday on the back of global growth concerns as austerity measures impact upon the developed world.