London: Gold rose for a third day Wednesday, heading to within touch of another record high as the waves of nervousness over the global economy steered investors into perceived safe-haven assets.
Spot gold was bid at $1,258.15 an ounce at 1040 GMT GMT, against $1,253.10 late in New York on Tuesday. US gold futures for December delivery rose 90 cents to $1,260.20.
Gold has risen by about 15 per cent so far in 2010 and is could reach its third record high this year since an all-time high of $1,264.90 in June, marking ten years of continuous increases.
The rally has been driven in large part by the emergence of the difficulties of several euro zone member states in covering the spiralling cost of financing their debt burdens as the regional economy sputtered.
Evidence of cracks in the US economic recovery and cooler Chinese data, combined with doubt about the strenuousness of stress tests conducted on European banks has created a springboard for investors to dive into gold.
"It's a perfect storm, which will now take us up to challenge the all-time high and maybe even make new highs," said Credit Agricole analyst Robin Bhar.
"All the factors seem to have come together at a time when physical dedmand is also propping up the makret, but as with all the other precious metals, physical demand is probably not going to be the factor trhat drives it to new highs. It has to be this investment desire."
With the resilience of the US recovery in question and the premium investors demand in exchange for the risk of holding the sovereign debt of certain euro zone members returning to the record peaks seen in early May, gold is now less than one per cent shy of the late June high.
The metal has hit tough resistance at $1,260 an ounce, just below its all-time high, but analysts say they are confident in the metal's rise.
"It seems to be benefiting from equity weakness, the renewed euro zone sovereign debt jitters and possibly concerns about new US spending measures," said Citigroup analyst David Thurtell.
He said while some funds would be selling ahead of technical resistance at $1,260, "it's looking good".
UBS precious metals strategist Edel Tully said she had upgraded her gold price forecasts based on gold's traditional outperformance in September, coupled with safe-haven demand emanating from the focus on sovereign fiscal burdens.
"Given the range of factors conspiring to push gold higher in September, we raise our one-month forecast to $1,300, from $1,230 previously. We also lift our three-month target to $1,300, from $1,200 previously," she wrote in a report.
Major European stock markets followed Asia lower and the euro was on the defensive, after renewed fears about the euro zone banking system drove the single currency to life lows against the Swiss franc and Australian dollar and hurt financial stocks.
Gold usually suffers at the hands of strength in the US dollar, but with economy bears sharpening their claws as the euro declines, the two are moving in more direct correlation in their capacity as refuge in times of financial turbulence.
Heightened risk aversion was also reflected on the bond markets, where German Bund prices extended gains, driven by worries about the banking sector and after Ireland extended its guarantee for short-term bank liabilities.
Elsewhere silver also rose 0.4 per cent to $19.95 an ounce from $19.83, having earlier approached the previous session's high at $20, its highest in two-and-a-half years.
Platinum was at $1,554.50 an ounce against $1,553.03, while palladium was at $522.05 against $520.85.
The metals have taken support in recent weeks from strikes going on in major platinum group metals producer South Arica, though the mining industry itself has been little affected.
"It is the climate of industrial action throughout the country that we believe is important and may hold relevance for platinum prices," said HSBC in a note. "South Africa produces three-quarters of the world's platinum output."
"Unlike gold, platinum's supply/demand balances are tight, with relatively little refined platinum held in above-ground storage."
