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Gold shot up above
$1,500 an ounce on Wednesday for the first time ever, as worries over
the health of the global economy boosted the metal as a safe haven.

Spot gold hit a
high of $1,505.21 an ounce and was bid at $1,505.16 an ounce against
$1,493.90 in New York on Tuesday. U.S. gold futures for June delivery
rose $10.60 an ounce to $1,505.70.

Silver tracked gold
higher, extending a stellar performance that has seen the grey metal
outperform other precious metals this year. Silver hit a 31-year high
at $44.56 an ounce and was later bid at $44.51 against $43.89.

Gold prices are up
5 per cent in April and look set to extend gains as the metal’s appeal
as a haven from risk was boosted by talk that Greece may have to
restructure its debt and Standard & Poor’s threat to downgrade
America’s triple-A credit rating.

“There is still
going to be a lot of uncertainty over the strength of growth, in the
United States in particular,” said Macquarie analyst, Hayden Atkins.

“It looks like that
is going to be quite weak in the first quarter, so that may rattle a
few people. Then we have a critical policy point coming up with the
expected end of (the second round of) quantitative easing. There is
enough uncertainty floating around heading into the middle of the year
for people to stick with gold,” Mr. Atkins said.

While investors in
the United States and Europe are seeing the metal chiefly as a safe
store of value and a hedge against currency devaluation, stronger
inflation and rising consumer incomes in China and India are also
boosting demand there.

“The theme of
longer term higher inflation than we have seen in the last 10 years in
China is a pretty solid view, so gold is going to be an asset class
that is probably going to be more in favour in China than it has been
in the past,” Mr. Atkins further said.

China is the world’s second biggest gold consumer behind India, as well as being its biggest producer.

Rising oil, weaker dollar

In the short term,
losses in the dollar on Wednesday are supporting the precious metal
above $1,500 an ounce. The euro rose to a session high against the U.S.
dollar after an auction of Spanish bonds saw decent demand from
investors.

Weakness in the
dollar boosts gold’s appeal as an alternative asset and makes
dollar-priced commodities cheaper for holders of other currencies. Gold
priced in euros and sterling remained off recent highs on Wednesday.

Oil prices also
recovered, rising back toward the multi-year highs they hit earlier
this year as unrest in the Middle East and North Africa sparked fears
of a supply outage.

Higher oil prices
tend to benefit gold, both because they can boost commodities as an
asset class and lift interest in gold as a hedge against oil-led
inflation.

The gold:silver
ratio – the number of silver ounces needed to buy an ounce of gold –
meanwhile fell to its lowest since 1983 at 33.8.

“The last time
silver was this expensive in relation to gold was almost 28 years ago.
Both precious metals are still reaping the benefit of the news of
recent weeks and days,” said Commerzbank in a note. Platinum was at
$1,786.24 an ounce against $1,761.50, while palladium was at $753
against $726.95.Reuters