PARIS - GOLD'S record advance could continue as nervous investors buy into a traditional store of value against the turbulent backdrop of a falling dollar, higher inflation and a global credit crunch, analysts say.

On Friday, the price of gold broke through 900 dollars (S$1,290) an ounce for the first time during trading in New York. Futures touched an all-time record of 900.10 dollars an ounce after strong price gains in London trading earlier.

Gold's last great charge was in the 1970s - a decade marked by recession, the two stunning oil shocks of 1973-79 and 1979, rampant inflation and doubts about the outlook for the US economy, then as now the world's largest.

Its fortunes turned again in recent years on rising demand for all commodities, driven by the booming Chinese and Indian economies.

But the real kick came in late 2007 as the prospect of slower growth and rising inflation raised the spectre of 'stagflation' - the bugbear of the 1970s - coupled with a fearsome credit crunch sparked by the collapse of the US subprime home loan market.

Dan Smith, metals analyst at Standard Chartered, said 'investment in gold is being driven by a number of factors including its safe-haven status, concerns about the outlook for the US dollar and inflation fears.'

After a likely consolidation of the 25 per cent gains made over the past year, Mr Smith said he expects a further rise to 950 dollars, with 1,000 dollars possible at some point during 2008.

'Given US growth concerns, precious metals are likely to be favoured by commodity investors,' he said.

'We are forecasting that the gold price consolidates through the first half of 2008 before driving to new record highs to average 950 dollars by the fourth quarter of 2008.'

'Given this level, the price could well hit 1,000 dollars at some point during the year.'

Gold has always been a store of value and although many economists argue that it has no place in a modern monetary system, investors continue to look to it as a safe haven in times of trouble .

The US economic outlook is increasingly uncertain, with top US investment banks - among them Goldman Sachs and Merrill Lynch - saying that the United States is in recession or very soon will be.

'Since the economic picture can be expected to grow increasingly gloomy, the markets are expecting the (US central bank) to cut interest rates a number of times in the next few months,' said analyst Eugen Weinberg at Commerzbank.

A key issue will be the resulting expected weakness in the dollar, which makes it cheaper for holders of strong currencies to buy into gold, while inflation will eat away returns on bank deposits and savings.

'The scale of buying interest that continues to flow into the market, and the fact that dips remain extremely short-lived again suggests gold has plenty of upside work still to do,' said TheBulliondesk.com analyst James Moore.

'Nine hundred dollars remains the near-term target. However there is little to suggest gold's charge will halt once it gets there,' Mr Moore said. -- AFP

Is this article useful to you?