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Gold rose to a record for the 15th time in the past month as the slumping dollar boosted investor demand for the metal as an alternative investment. Silver extended a rally to the highest level since 1980.
The dollar slipped for a second day and was near a nine- month low against a basket of six major currencies on speculation that the Federal Reserve will ease monetary policy further to spur growth. Goldman Sachs Group Inc., UniCredit SpA and Citigroup Inc. raised their gold forecasts in the past week, before prices reached $1,375.70 an ounce today in New York, the highest ever.
"Gold has become the world's third reservable currency as all currencies seem intent upon racing each other downward," said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. He advised clients to buy the metal. The dollar and the euro are the top reserve currencies.
Gold futures for December delivery climbed $23.80, or 1.8 percent, to settle at $1,370.50 an ounce at 1:55 p.m. on the Comex in New York. It was the biggest gain for a most-active contract since Oct. 5. The previous all-time high was $1,366 on Oct. 7.
Goldman Sachs forecast on Oct. 11 that the price would reach $1,650 in 12 months. UniCredit analyst Jochen Hitzfeld in Munich raised his 2011 target to $1,500 on Oct. 12, and Citigroup's "short- and medium-term" forecast on Oct. 7 was $1,450.
"This momentum higher will attract investors to participate in the next move up," said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland.
A Fed purchase of $500 billion of government securities would lead to lower interest rates, weighing on the dollar and aiding gold, Dincer said.
Treasury Purchases
In March, the central bank finished $1.7 trillion in purchases of Treasuries, mortgage-backed securities and housing- agency bonds. The Fed has kept its benchmark lending rate at zero percent to 0.25 percent since December 2008.
Gold, which pays no interest, becomes a more attractive investment when borrowing costs decline. The metal has gained 25 percent this year.
"Both gold and the dollar agree that Ben Bernanke will be victorious in his quest to foment a robust rate of inflation," said Michael Pento, a senior economist at Euro Pacific Capital in New York. Bernanke is the Fed's chairman.
Gold for immediate delivery reached a record $1,374.35.
Investors should be prepared for a correction in prices, Adam Sieminski, a Deutsche Bank analyst, said in a report. The 14-day relative-strength index for gold futures has been above 70 for the past three weeks, a signal to some traders that prices may decline.
Investors 'Wary'
"Investors need to be wary of a short-term correction in the U.S. dollar during October, and with it, a possible setback to recent price advances" in gold, Sieminski said. "We view any correction in gold prices over the next three weeks as yet another buying opportunity. The next hazard for bullish gold investors will be the first four weeks of next year, which has seen the dollar strengthen nine out of the last 12 years."
Silver futures for December delivery rose 78.5 cents, or 3.4 percent, to $23.932 an ounce on the Comex, after touching $23.975, the highest level since September 1980.
Platinum futures for January delivery gained $24.10, or 1.4 percent, to $1,707.40 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery climbed $13, or 2.2 percent, to $593.65 an ounce.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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