Gold prices hit 27-year high as greenback drops

Gold prices rose to a 27-year high after the dollar hit record lows, boosting the appeal of the metal as an alternative investment.

The price of gold is up 20% this year, heading for its seventh straight annual gain.

The dollar fell Thursday to record lows against the euro and against a weighted basket of six major currencies, including the Japanese yen and British pound. Five of the last six bear markets for the U.S. currency sent gold higher in dollar terms.

“It’s hard to keep gold down when the dollar is getting crushed,” said Carlos Perez-Santalla, gold trader and president of Hudson River Futures in New York.

Gold futures for December delivery rose $6.40, or 0.8%, to $768.70 an ounce on the Comex division of the New York Mercantile Exchange, marking the highest closing price for the most actively traded futures contract since Jan. 22, 1980, the day after gold reached a record $873 an ounce.

The gold contract for delivery this month rose $6.60 on Thursday to $764.10.

Silver also rallied. Silver futures for December delivery climbed 5.3 cents, or 0.4%, to $13.80 an ounce. The metal is up 6.7% this year.

Gold’s continuing surge is powering a heady bull market in some gold mining stocks. Barrick Gold Corp. jumped $1.42 to $42.13 on Thursday and is up 37% this year, compared with an 8.6% rise in the Standard & Poor’s 500 index. Agnico-Eagle Mines Ltd. surged $1.32 to $55.13 and is up 34% this year.

But shares of some miners have lagged. Newmont Mining Corp., which rose 81 cents to $46.14 on Thursday, is up just 2% this year. Newmont recently warned that it was having difficulty replacing depleted reserves.

In addition to the falling dollar, the rising price of oil may be leading some investors to buy gold. That’s because the metal is viewed as a hedge against inflation. Oil futures climbed Thursday to a record $89.47 a barrel.

Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, has surged, pushing the fund’s holdings to a record 594 metric tons. The fund began trading in November 2004. If it were a central bank, the fund would be the 11th-largest holder of gold reserves.

Some technical analysts say gold may be poised for a decline.

“The market continues to be overbought and essentially correction-free and is thus vulnerable to sharp and quick swings in the opposite direction should adverse news or perceptions hit the trading floors,” said Jon Nadler, analyst at Kitco Minerals & Metals Inc. in Montreal.

But Richard O’Brien, chief executive of Newmont Mining, said he expected gold to move even higher, though he didn’t say how high.

“It still has room to run,” he said. “Prices seem in line with indications they will go up further.”