Gold hit a 28-year high today as the commodity continued to surge due to record low dollar prices, record high oil prices and increasing concern regarding the health of the world's largest economy and increasing financial systemic risk.
A weaker US currency makes dollar-denominated metals cheaper for investors in other currencies, while gold is also seen as a hedge against oil-led inflation.
Spot gold rose as high as $739 an ounce, its highest since January 1980, also boosted by technical buying and short-covering.
It was quoted at $732.50/733.30 on Friday evening, against $734.20/735.00 in New York late on Thursday.
'We expect further advances into 2008 based on new lows in the US dollar,' Deutsche Bank said in a weekly report.
'This would, in our view, enable the gold price to move above $800/oz during next year. However, our internal forex flow data suggest the dollar may now be entering oversold territory and that the gold price is ripe for a short term correction', it said.
Other precious metals also advanced today, with silver rising to its highest in more than three months, platinum hitting its highest since early May and palladium touching a five-week peak.
There has been a marked increase in both sales transactions and volumes traded in the last two weeks, said Mark O'Byrne, managing director of Dublin-based brokerage Gold & Silver Investments.
He said sales have increased internationally and some customers of Northern Rock, last week bailed out by the Bank of England, have put their money into gold, he said.
'The most notable increase in sales was in the UK and clients from the UK specifically mentioned nervousness regarding the Northern Rock 'run on the bank' as their motivation for buying', he said.
'Buyers are diversifiers and are buying more for safe haven reasons,' he said.
