From BBC News, today November 29, 2005:

Gold prices have surged past the $500-an-ounce mark, and more gains are
predicted as investors look to protect themselves against inflation fears.

Gold hit $502.70 in London, its highest level since February 1983.

Other commodity prices also have been climbing, and platinum topped the
$1,000-an-ounce level.

Demand from jewellery makers is helping to boost prices, as is
speculation that some central banks want to cut US dollar holdings and
boost gold stores.

After hitting the high, gold fell back and stood at $496.40 an ounce in
afternoon trading in London.

Ideal conditions

"The expectations of inflation in the coming year are very high," said
Albert Cheng of the World Gold Council.

"People are looking for an alternative investment" to products such as
US dollar-based bonds, he said.

A number of factors have come together to create what analysts are
calling a commodities boom.

As well as the worries that inflation will erode the value of bonds and
shares, strong demand from Asian economies for metals has been squeezing
supply at a time when producers are finding it difficult to boost output.

This time of year also normally sees demand for gold pick up as
jewellers prepare for the Christmas holiday period and Indian wedding
season, analysts said.

Polished performance

Prices are likely to climb - even though there may be some short-term
profit-taking - because $500 is an important psychological level which
acts as a deterrent until it is broken through.

"Once they are comfortable with this level, it will not deter people
from buying jewellery," said the World Gold Council's Mr Cheng.

"People tend to buy more when the price of gold is actually upward," he
said.

The gold price hit a record of $873 an ounce in January 1980, and hit
$502 for one day in December 1987.

Since then, it has recovered from lows of about $250 an ounce in 2001
and has surged almost 15% this year alone.

Platinum prices have also climbed in recent months, hitting their
highest levels in 25 years, driven by strong jewellery demand and the
metal's important role in car exhausts.

Buying drive

Many investors are expecting gold prices to go higher as central banks
start increasing holdings.

According to hedge fund manager Juerg Kiener, it is only a matter of
time before Asian central banks start selling US dollars. Russia has
already said that it is considering boosting its gold stores.

He said that concerns about the size of budget deficits in some of the
world's biggest economies, as well as fears about higher inflation and
slower growth, had created a good environment for buying precious metals.

"Gold is the only monetary asset class which will protect investors," Mr
Keiner said.

Should Asian central banks move into the gold market, then the effect
could be "explosive", said Philip Klapwijk, who is a chairman of
consultancy GFMS and a director of the Global Precious Metals Fund.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/4480430.stm

Published: 2005/11/29 12:37:22 GMT