Gold up, hits new record on market jitters

Gold rose more than 1 percent on Friday, setting a record high for a second straight day and posting its biggest one-week gain in 2-1/2 years on worries about stalled US growth and Europe's debt crisis.After rallying around 3 percent to a record $1,877 an ounce earlier in the session, bullion sharply pared initial gains as Wall Street briefly found its footing. Rising oil and commodity prices also sapped some safety bids for gold after it had gained 6 percent over the past five days.The bullion market is awaiting next week's conference of central bankers in Jackson Hole, Wyoming. Some analysts said Federal Reserve Chairman Ben Bernanke could unveil a third round of quantitative easing to revive economic growth. "Gold is driven by the uncertainty about a new global recession... and the possibility that Europe will engage in additional quantitative easing," said James Dailey, portfolio manager of TEAM Financial Asset Management, which oversees $200m in assets. "While an expected correction could be violent, I don't think it may last too long." Spot gold was up 1.3 percent at $1,847.90 an ounce by 3:00 pm EDT. It is on track for its biggest one-month rise in nearly 12 years in August and up 30 percent so far this year. US gold futures for December delivery settled up $30.20 at $1,852.20 an ounce. Trading volume topped 270,000 lots, the highest this week but below last week's pace. Silver rose 4.5 percent to $42.40 an ounce.A raft of global economic data this week including sluggish German growth numbers and a weak US manufacturing report sparked heavy selling of equities and riskier assets such as industrial commodities.Mounting economic fears prompted investors to dump stocks and other risk assets for the perceived security of gold. The inverse correlation between bullion and equities has tightened to negative 0.5, and a ratio of the S&P 500 divided by gold fell to its lowest in 23 years.A near $400 rally in the price of the yellow metal has caused some strains in gold vault storage space particularly in the western United States, and some retail clients have had to pay higher service fees, Savneet Singh, chief executive of Gold Bullion International (GBI), said. Singh said the premium of small physical bullion bars is now significantly above spot gold prices due to huge demand. GBI sells physical precious metals and offers delivery and storage services to institutional and retail investors.Gold's rally prompted the CEO of Canadian gold producer Goldcorp to warn of a minor correction in gold prices before the end of this year even as the long-term outlook remains strong.Speculation was also rife on Friday that the CME Group, the world's largest commodity exchange, could raise margins on gold futures once more, after a similar move this month dampened the precious metal's sharp run higher. Gold once again traded briefly at a premium to platinum, after doing so last week for the first time since 2008. Concerns over economic growth, while lifting gold, are weighing on industrial metals such as platinum.Platinum rose to its highest since early May, up 1.7 percent at $1,868.50 an ounce. Palladium bucked the trend, falling 1.1 percent to $743.49 an ounce. From / Arabian Business News