Gold price hits 3-week high as investors buy metal in record numbers

Gold climbed by as much as $21 an ounce in afternoon trade on Thursday as the metal's status as a safe haven asset is once again renewed.

Gold for delivery in December ended the day $17.80, or 1%, higher to settle at $1,731.80 in New York with rising geopolitical tension after reports from the Pentagon that Iran fired shots at a US unmanned airplane prompting investors to seek the relative safety of gold.

Gold ETFs or exchange traded funds tracked by Bloomberg saw their physical holdings surge by more than 4 tonnes to a new record high of 2,592 tonnes.

The precious metal was also buoyed by news from Europe where the ECB decided to continue with its highly-accommodative interest rate regime and the prospect of continuing dovish US monetary policy under re-elected US president Barack Obama.

Keeping markets fed with easy money as has been the case under US Fed chairman Ben Bernanke's open-ended quantitative easing program that kicked off in December 2008 adds to gold's allure as an inflation hedge and storer of wealth amid currency depreciation.

Another issue counting in the gold price's favour over the near term is renewed worries in financial markets over the looming "fiscal cliff" in the US in January when nearly $600 billion worth of spending cuts and tax increases are triggered that would put the country's economy in danger of sliding back into severe recession.

MarketWatch quotes Fawad Razaqzada, a technical analyst at GFT Markets as saying given Wednesday’s “vicious sell-off in the equity markets, the gains in gold and silver suggest they are once again viewed by some as safe- haven investment vehicles rather than risk assets.”

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