Gold breaks $1,500 to hit new high

Gold rose to a record high above $1,500 a troy ounce and silver soared past $45 yesterday as developed countries' huge debt burden further pushed the appeal of the precious metals.

Investors are flocking to the safe havens amid fears of the impact of rising inflation from China on Europe and a warning by Standard & Poor’s that the US could lose its triple A credit rating will devalue paper currencies.

On the spot market, bullion rose 0.9% on Wednesday to hit a fresh nominal high of $1,505.70 a troy ounce. Adjusted for inflation, however, it remains below the peak hit in 1980.

Silver was 3.4% higher to $45.37 a troy ounce – the highest since 1980.

As gold and silver soared, the dollar on Wednesday tumbled to its lowest level in 16 months against an international basket of currencies, and was within reach of an all-time low, the Financial Times reports.

Upbeat expectations for the global economy led many gold investors to take their profits at the start of 2011. But since then the jump in oil prices, turmoil in the Middle East and the earthquakes in Japan have eroded confidence in the economy. 

Investors’ holdings of gold via exchange-traded funds have risen by 1.38 million ounces so far in April – the biggest gain for any month since August 2010.

Many expect the gold rally to continue, though analysts warn a hawkish tone from Ben Bernanke, US Federal Reserve chairman, next week could damp enthusiasm.

Gold’s rise appears modest when compared with its cheaper cousin, silver, however. The metal’s price has spiked 154% over the past 12 months – compared with a 32% rise for gold – leading many analysts and investors to call a bubble.