Gold passed through a record $US1200 ($NZ1654) per ounce in New York as investors digested the $US60 billion ($NZ88.3 billion) debt burden of the Persian Gulf conglomerate Dubai World, which requires radical restructuring and faces potentially huge losses on global property investments.
While the concerns of markets around the world over state-controlled Dubai World's debt have eased since the six-month $US60 billion debt default was announced late last week, investors have been wary on how the lending for the Dubai property bubble could impact on banks around the world.
Record spot gold prices have been hit repeatedly since early-November.
On Tuesday night on the Comex division of the New York mercantile exchange, gold reached $US1201.32, before falling away to trade around $US1195 yesterday morning; New Zealand time.
A basket of weak global currencies in recent weeks, led by the United States dollar, the Yen, the British pound and to some extent the Euro, have undermined investor sentiment and pushed them toward gold as a traditional safe-haven investment.
Several reserve banks around the world have similarly shunned the currencies in preferance for gold, buying from the International Monetary Fund which has sold more than 200 tonnes of a total 403 tonnes of gold it has had on the market since last September.
Craigs Investment Partners broker Peter McIntyre said the markets were seeing a swing from "household risk to sovereign debt risk".
"Gold is now becoming the new reserve currency," he said.
Dubai's debt default was an example of the "emerging sovereign risk, where the debt burden is being taken up by governments", Mr McIntyre said.
"The Dubai situation meant investors splurged into gold because of the heightened risk around the amount of sovereign debt," he said.
Positive economic data from China, Japan and the United States in recent days had also helped offset concerns over Dubai's debt, of which it plans to restructure about $US26 billion, while sharemarkets in Europe, Asia and the US had recovered from the shock quicker than the Persian Gulf bourses.
Mr McIntyre predicted that during the next three months gold would push through the $US1250 mark, possibly underpinned by worsening geo-political issues or the effects from any sovereign defaults.
However, he cautioned that "having run so hard" there would be some profit taking by investors, which could cause a price decline.
