Michael Babad
RTGAM


Gold reaches milestone.

Gold hit another milestone this morning while silver reached its highest level in about three decades as the U.S. dollar weakened again. Gold hit $1,300 (U.S.) an ounce, a record, before slipping back just marginally, while silver climbed to $21.3875 an ounce, also before slipping back.

Gold has gained about 18 per cent this year - Bloomberg News notes it is heading for its 10th annual gain in a row for the longest streak since at least 1920 - and some analysts project it will continue to climb. Normally a hedge against inflation, investors have flooded to the safety of bullion amid rising fears that the U.S. economy will continue to sputter.

"Fears of runaway inflation or a dollar collapse, which underpin some of the most bullish forecasts for gold, remain exaggerated," Capital Economics in London said in a report yesterday. "Nonetheless, prices should continue to be supported by strong demand for a safe haven from other potential economic and financial shocks, such as a U.S.-China trade war and the breakup of the [euro zone].

Believing inflation will remain low, Capital Economics said any fading demand for gold as a hedge against inflation could be replaced by heightened demand for a safe haven. The report projected prices will remain high for several years, dipping slightly to $1,200 an ounce by the end of this year but rallying further next year to at least $1,400 "as new shocks hit the global economy and financial system."