Spot gold surged to a 28-year high in European trade yesterday, as the dollar sank to record lows against the euro and oil traded near all-time highs.
Gold rose as high as $730,25 (about R5170) an ounce, the highest since January 1980, when the metal jumped to $850.
"The market was in two minds yesterday, jumping between $722 and $726, but the euro's push through $1,40 against the dollar gave the market fresh impetus to break up again," said Tom Kendall, metals strategist at Mitsubishi Corporation in London.
"The metal is likely to see some consolidation now until the US markets open. We could see further gains then, but the higher we go, the more nerves will be jangling," he said.
The dollar sank to record lows against the euro, weighed down by a hefty US interest rate cut earlier this week.
A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Oil hovered just below a record high level after US crude inventories fell more than expected and as the threat of a storm near Florida ignited supply concerns.
A European precious metals trader said the weaker dollar, higher oil prices and subprime fears attracted a lot of investors towards the gold market. "I think we will see a highly volatile market, but the tendency is to move on the upside," he said. - Reuters