Gold surges through the $1,300 barrier

The gold price surged to an all-time high as it powered through the $1,300 barrier yesterday.

The price peaked at $1,300.15 in intra-day trading as investors continue to be drawn to its safe haven status. The precious metal has reached new peaks five times in the past month alone and is now up by 17% since the start of the year.

The gold bugs continue to talk up the commodity as a store of value at a time when the multiple fears of a double-dip recession, further quantitative easing and rising inflation down the line continue to drive investors away from the stock market.

Indeed, it has proven the best performing major asset class over the past decade, but can it really keep on rising?

A number of analysts and investors certainly think so. Angelos Damaskos, manager of the Junior Gold fund, said: ‘What is clear is that with the current macro backdrop there is a lot of demand for gold and this could very easily push prices significantly higher.’

Some analysts agree, having revised up their price targets for the precious metal.

Michael Widmer at Merrill Lynch recently raised his price forecast to $1,500 by the end of next year, citing investor concerns about macro weakness.

Other investors are even more bullish in their outlook. Many bulls argue the recent record price is something of a misnomer as on an inflation-adjusted basis, gold’s real record price would be $2,358 an ounce and demand for the precious metal certainly remains very strong.

Figures from the World Gold Council show total demand for gold rose by 36% to 1,050 tonnes in the second quarter, while demand for investment soared by 118% to 534.4 tonnes. Reflecting investors’ appetite for the commodity, ETF Securities’ Gold ETC has seen inflows of $587 million in the last six weeks alone.

But it is not just private investors buying up the commodity. Perhaps even more significantly, so are a number of mining companies and several of the world’s best known investors are also increasing their exposure.

Miners increase exposure

The miner AngloGold Ashanti is looking to raise $1.37 billion through a share and bond offering in order to buy back the company’s hedges on the price of gold. A similar move was carried out by Barrick Gold Corporation last September with the company issuing $3 billion of stock in order to buy back $5.6 billion worth of hedges.