Gold price rises on inflation and Europe worries

Gold bars in a safe Investors are stocking up on gold

The price of gold has hit another record high as investors worry about inflation and Europe's budget troubles.

It hit $1,421 but later fell sharply below $1,400 in US trading on Tuesday.

Gold is traditionally seen as a haven for investors at times of economic stress.

The price has now risen by about 7% since the US central bank announced last week its plan to inject $600bn (£372bn) into the American economy.

Investors worry this will lead to higher inflation, and are also concerned about the state of the Irish Republic's economy as it tries to cut its budget deficit.

Printing presses

Some economists say higher inflation could be on the way after the US Federal Reserve's decision to effectively print huge sums of money to try to stimulate the economy.

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The gold market is swimming in uncharted waters”

End Quote Ong Yi Ling Analyst

The move has also been criticised by other countries, which fear large inflows of money into their stock and property markets, which can be destabilising.

As well as this, there are renewed questions about the stability of one of Europe's economies.

The Irish Republic is struggling to convince the bond markets that it does not need financial help from the European Union or the International Monetary Fund.

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Dublin will soon unveil its new budget as it tries to cut its deficit from a huge 32%, but there is mounting concern it may not be approved by the Irish parliament, the Dail.

The price of gold has risen by about 29% this year.

"With record highs set in quick succession, the gold market is swimming in uncharted waters," said Ong Yi Ling of Phillip Futures in Singapore.

"The asset purchases of the US and debt problems in the eurozone provide a compelling backdrop for gold prices to continue appreciating on a longer term basis."

Meanwhile, the price of silver has risen to $28 an ounce, its highest level since March 1980.

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