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2011-08-23 05:14:47
The price of gold has briefly risen above the $1,900 an ounce mark for the first time.
The price rise was driven by concern about the global economic recovery and the anticipation of further expansion of the supply of dollars by the US Federal Reserve.
The precious metal rose 0.9% to $1,913.50 an ounce in Asian trading.
It later fell back, as optimism returned and stock markets rallied after the open of trading in Europe.
Fears of a slowdown in the US and the debt crisis in Europe have spurred demand for gold, which is seen as a safe investment in times of uncertainty.
"For the time being investors are happy looking at gold as safe haven in these troubled times, and will continue to do so until we see something positive and sustainable." said Darren Heathcote of Investec Australia.
Dollar vs gold?
Analysts said demand for gold was also being driven by speculation that the US Federal Reserve may announce new stimulus measures in a bid to boost the economy.
Central bank governors from across the globe are scheduled to gather for their annual meeting at the Jackson Hole summit later this week.
There is growing speculation that Ben Bernanke, the governor of the US central bank, may announce fresh stimulus measures in his speech at the summit.
This may include a third round of "quantitative easing" (QE), by which the Fed buys up US government debts, and thereby introduces more dollar cash into the financial system.
"The idea for QE2 was conceived during the Jackson Hole summit last year," Ong Yi-Ling of Phillip Futures told the BBC.
"So the markets are hoping similar measures could be announced at this year's speech, and that is spurring demand for gold."
Colin Whitehead of Fat Prophets added: "If they push through with more stimulus, gold could rise even further."
Ben Bernanke US Federal Reserve chairman, Ben Bernanke, is thought to be pondering more quantitative easing
He explained that a fresh stimulus package would mean that the US would have to print more money to boost liquidity in the markets, which in turn could see the US currency weaken further.
"The underlying driver of gold prices is the depreciating US dollar value," he said, "so the more money they print, the stronger gold gets."
Libya uncertainty
Oil prices also rose in early Tuesday trading, as fighting continued in Libya, and because of expectations that official figures will show a decline in US crude stockpiles.
Brent was up 64 cents to $109 a barrel, while US light crude advanced 91 cents to $85.62.
"It could take months before oil can start to flow again from Libya," said John Vautrain, oil analyst at energy consulting firm Purvin & Gurtz.
"I think there was a lot of euphoria on Monday. But the whole country is not completely pacified yet and we don't have an organised government. A lot is lacking."
Oil prices were also buoyed by a more positive tone in stock markets during morning trading in Europe.
The London, Paris and Frankfurt markets all rose 1%-2% in the first hour of trading, while the gold price fell back from its new high to below $1,900 again.