Gold rose above $900 an ounce on speculation that moves by central banks to ease the global credit crunch won't revive financial markets, boosting demand for the precious metal as a haven. Silver also gained.
The Federal Reserve, the European Central Bank and four other central banks lowered benchmark lending rates in the face of a deepening financial crisis spreading from Wall Street. Equities in Asia and Europe fell, and U.S. stocks were volatile. Gold is up 8.8 percent this week.
"The rate cuts are not enough to restore confidence," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "All they did was put another Band-Aid on. You still have systemic fear. People who were afraid of the banking system are still massively scared. Gold is a storehouse of value when all the world's assets have declined."
Gold futures for December delivery jumped $24.50, or 2.8 percent, to $906.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $924.90. The price rallied to a record $1,033.90 in March after the Fed slashed borrowing costs over seven months.
Silver futures for December delivery gained 39.2 cents, or 3.4 percent, to $11.772 an ounce. The price has dropped 21 percent this year.
Gold has gained 8.2 percent this year while the Standard & Poor's 500 Index of equities dropped 32 percent in New York through yesterday. The index rose as much as 2.4
percent and fell as much as 2.5 percent today. The Dow Jones Industrial Average climbed as much as 1.9 percent and sank as much as 2.7 percent.
Since the second quarter of 2007, banks worldwide have posted about $593 billion in credit losses and writedowns. The International Monetary Fund said the global economy may be headed for a recession next year and increased its estimate of losses tied to loans and securitized assets to $1.4 trillion, up from $945 billion estimated in April.
The Bank of England pledged $87 billion to help boost capital at Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks. Gold priced in pounds and euros reached records Thursday.
"Gold cannot be viewed only in terms of the U.S. dollar but must also be seen in terms of other currencies as well," said Dennis Gartman, an economist and editor of Suffolk, Virginia-based Gartman Letter. He recommended investors buy more gold today.
Lowering interest rates devalues currencies, analysts said. The dollar fell as much as 0.7 percent against a basket of six major currencies including the euro and yen.
"Money is cheap," said Walter Otstott, a senior broker at Dallas Commodity Co. in Dallas. "You can expect record highs to happen this year for gold. You can't print gold."
Last week, the U.S. government passed a plan to spend $700 billion to rescue financial companies by buying illiquid assets.
"In the long term, gold is looking at this liquidity that they're pumping into the system as hyperinflationary," said Integrated Brokerage's McGhee.
