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SINGAPORE, Dec 8 (Reuters): Gold galloped to a new 24-½-year high today on continued fund buying as the yellow metal, backed by strong fundamentals, outperformed traditional assets such as stocks and bonds.
But analysts said gold remained very vulnerable to fund liquidation after it made steep gains in recent weeks on the back of inflation concerns, high oil prices and fund interest in gold and other commodities.
Spot gold had risen to $518.00/518.60 an ounce, against $513.90/514.70 last quoted in New York Wednesday. Earlier, gold hit $518.50 an ounce, its highest since April 1981.
"At the moment the mood is still jubilant. People are still buying and I don't know what's happening, perhaps buying before Christmas," said Darren Heathcote, head of trading at N M Rothschild in Sydney.
After pushing through the $515 level, he put the next target for gold at $520.
However, he said the current price level appeared to be unsustainable due to large long positions on the New York Mercantile Exchange's COMEX division and the Tokyo Commodity Exchange (TOCOM).
Gold, used in jewellery and as an investment, has surged as investors switch from traditional securities such as shares and bonds into gold and other commodities for bigger returns and on fears about inflation and economic growth.
Gold has also been supported by tight supply, strong demand and speculation that some Asian central banks would increase gold holdings in their reserves, dealers said.
Russia, Argentina and South Africa have expressed interest in increasing their gold holdings, even though European central banks, which are signatories of the Central Banks Gold Agreement, have sold over 100 tonnes since September.
Strong buying interest in Japan, where investors are concerned about the weaker yen and inflation, also gave gold a boost, dealers said.
Other precious metals followed gold's lead.
Platinum rose to $993/997 an ounce, from $991/996 late in New York. On Monday, platinum rose to $1,006, the highest since March 1980.
Platinum's sister metal, palladium, was at $276/280 an ounce versus $274/278. Earlier, it hit $278, the highest since April 2004.
Silver was at $8.81/8.84 an ounce, against $8.77/8.80 late in New York. On Wednesday, silver hit $8.86, its highest since August 1987.
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