By Allen Sykora of Kitco News (Kitco News) - Most-active gold futures poked above the much-anticipated $1,300-per-pounce level for the first time early Friday on the Comex division of the New York Mercantile Exchange. “It’s a safe-haven story. A lot of people are scared of the recent performance of the dollar. A lot of money is coming into the commodities market, particularly the precious metals,” said Afshin Nabavi, head of trading at trade house MKS Finance. Around 8 a.m. EST (1200 GMT), most-active Comex December gold was $3.90 higher at $1,300.20 an ounce after hitting an overnight peak of $1,301.30. Spot gold was $5.80 higher at $1,298.30. “With the dollar being under pressure, that naturally creates a path of least resistance for gold. And that path right now is definitely to the upside,” said Sterling Smith, commodity trading adviser and market analyst with Country Hedging. He also cited at least some apparent nervousness about European debt, with overnight weakness in the credit default swaps for Portugal, Ireland and Spain. Gold has steadily climbed since 2001, after prices for the precious metal had fallen into the $250s a number of times between 1999 and 2001. Analysts have cited a number of factors prompting the most recent round of safe-haven investment demand in recent weeks. This includes uncertainty about the strength of economic recovery in the U.S. and other Western nations, lingering worries about European sovereign debt that dominated headlines in the financial press earlier in the year and general uneasiness about devaluation of global currencies. More recently, the focus returned to easy Federal Reserve monetary seen as hurting the U.S. dollar and ultimately contributing to potential inflation whenever the economy recovers. As the market rallied, the move was accelerated by buying from traders and funds that rely on technical charts. Numerous brokerages and banks issued research reports in recent days suggesting that it was only a matter of time before gold hit $1,300. However, many also cautioned that this is also a likely area for some speculators to sell and book profits, meaning potential for at least a temporary price retreat from here. Nabavi also suggested some kind of pause could be in order before any further advance to the $1,350 area. “I think it ($1,350) is going to happen, but I don’t see it happening that quick, to be honest,” he said. “Not a huge correction. But it would be good to see at least (a correction to) the ($1,2)85-ish to ($1,2)80-ish area or something like that.” Smith said he is surprised the market has not yet triggered buy stops, which are pre-placed orders activated when certain chart points are hit, around $1,300. It’s hard to say where these might lie since “we’re boldly going where no gold has gone before,” he said. But some points might include $1,305 and $1,318 in December gold. “As far as the overall condition of the market, the bull looks fairly healthy here,” Smith said. “We haven’t had a lot of aggressive buying. We’ve made our move very quietly, which kept us getting too overbought in any way, shape or form.” Smith put chart support for December gold around $1,289. As for the rally over the last decade, much of the interest in gold “playing gold against dollar weakness,” R.J. O’Brien said in a report Thursday. This especially was the case from 2005 to 2008, as the euro strengthened to around $1.60 against the greenback. Historically, dollar weakness tended to lead to buying of gold as an alternative currency, plus a weaker greenback makes all commodities cheaper in other currencies and thus can boost demand. However, gold continued to rise since 2008, even though the euro has fallen back to the $1.30s neighborhood. In recent months, R.J. O’Brien said, the inverse relationship between the dollar and gold “seems to have broken down completely with both the dollar and gold rallying strongly in the first half of 2010. This, in turn, reflects the European sovereign debt crisis and the increasing distrust of all paper currencies, not just the dollar.” Often, traders were buying gold and Treasury bonds as a safe haven, meaning the metal frequently rose even on days when the dollar did likewise. During the decade-long bull run, the advent of exchange-traded funds made it easier for investors to buy gold. Metal is put to storage to back ETF shares that trade like a stock but track the price of the commodity. The world’s largest such ETF, SPDR Gold Shares launched in 2004, held 1,301.43 metric tons as of Thursday. This is more than the official holdings of all but four of the world’s central banks and International Monetary Fund, according to September data on the World Gold Council Web site. Back in 1980, gold hit record highs that stood for nearly three decades--$875 for spot-month Comex futures. Despite the rise since, however, gold remains far below levels that are adjusted for inflation, which is just over $2,300, according to the Minneapolis Federal Reserve’s consumer price index calculator.

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