Gold price jumps $1,200

Gold made a bold move higher on Monday as fears of new eurozone crisis and a fresh slide in the price of oil caused a huge sell-off on Wall Street.

In late afternoon trade on the Comex division of the New York Mercantile Exchange gold for February delivery was changing hands for $1,203.20 an ounce, up $17.00 or 1.4% from Friday's close.

Gold's gains in solid post-holiday trading volume also came into the teeth of a stronger US dollar which hit the highest level since November 2005 against the currencies of major US trading partners.

The dollar index has strengthened 13.2% over the past year, with almost all the gains coming since August. Gold and the dollar usually move in opposite directions, but gold has shown remarkable strength in recent months.

Plotted against the greenback on the basis of the past correlation between the two, the price of gold may now be expected to be touching $1,100 as this graph from Saxo Bank suggests:

CHART: Gold price rallies into teeth of rabid dollar

Source: Saxo Bank

After appearing to stabilize last week crude oil was sliding again on Monday, with the US benchmark West Texas Intermediate briefly dipping below $50 a barrel, a loss of 4% on the day.

Gold and oil usually rise and fall in tandem – rising oil prices pushes up inflation increasing demand for gold as a hedge – but with the sharp fall in oil, the commodities have been diverging.

Since 1970 the average ratio – how many barrels of oil can be bought with one ounce of gold – is around 15, but has now jumped to nearly 24.

Gold was also finding favour among investors departing equity markets as US stocks tanked over fears that a new leftwing government in Greece could leave the EU trading bloc and spark panic on financial markets.

The Dow Jones blue-chip index gave up more than 300 points, while the broader S&P500 was down nearly 2%.

Gold traded in euros leapt to €1,007 an ounce, the highest since September 2013.