Gold hit a record high overnight, after further weakening of the US dollar; sparking conjecture on the the future of the greenback as the world's reserve currency.
The precious metal hit $US1045 ($NZ1423) on the Comex Gold division of the New York stock exchange, as the US dollar weakened amid global inflation fears.
This prompted analysts to predict gold, considered a safe haven by investors, could increase to between $US1100 and $US1350 this year.
Gold has increased in value because of its safe haven status, through China buying more and because of the global flush of government-generated cash to prop up or stimulate recession-hit economies and financial markets.
The latter is the reason the greenback's value may be undermined.
Part of the record-setting price was attributed to a report by British newspaper The Independent, which said some Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the US dollar over a nine-year period with a basket of currencies for trading oil, Reuters reported.
However, officials from Saudi Arabia and Russia, the world's largest oil exporters, have since rejected the claims.
Saudi and Russia are among several countries attending an International Monetary Fund meeting in Istanbul, whose topics include the role of the US dollar as the world's reserve currency.
BNZ currency strategist Mike Jones said while there was a "good chance" the world could move to trading using a "basket of currencies" system in five to 10 years, it would have to be done in a slow "balancing act", because of the large size of US dollar reserves held.
"There has been a lot of talk recently about central banks' diversifying out of the US dollar, to gold and other currencies," he said.
Gold's previous high was $US1033.90 in March 2008 and it had twice since broached the $US1000 mark in February and August this year.
West Texas oil prices moved up almost $US4 to near $US71 on news of the gold price yesterday.
Some reports from Europe this week predicted gold would hit $US1100 in 2010.
New Zealand Mint bullion dealer Mike O'Kane yesterday picked $US1200-$US1300 by the end of the year and Craigs Investment Partners broker Peter McIntyre picked $US1350 within six to nine months.
Mr McIntyre said markets were increasingly discussing the merits of the the US dollar being used as the world's reserve currency, noting the greenback, British pound and Euro were all weak because their respective governments were "printing money" to stave off the financial crisis and stimulate economies.
He said weakening equity markets and more US currency concerns would continue to bolster the price of gold in the months ahead and "break through" $US1200, and it was "realistic" gold could top $US1350 within nine months.
Mr McIntyre said the combination of inflation fears and the weakening US dollar were the main drivers of the gold price, followed by weakening global equity markets and China buying more gold and "diversifying" away from greenbacks to gold and other assets.
"The US dollar will continue to weaken over the next six months because of the amount of cash in circulation.
The Federal Reserve [US central bank ] is waving a big stick, telling the nine major banks to lend money," he said.
Mr O'Kane, at New Zealand Mint, said the high New Zealand dollar was attracting more US bullion buyers, generally seeking safe haven investments, but conversely New Zealand bullion owners were not selling because of the high kiwi.
While gold had been through spikes and troughs during the past four years, it had on average appreciated about $US100 each year, he said.
Gold forecasts
Deutsche Bank: Gold above $US1100 an ounce in 2010.
RBS global banking and markets: Gold averaging $US950 in 2009; $US1000 in 2010.
Standard Chartered: Average $US1050 for fourth quarter 2009.
Bank of America Merrill Lynch: Gold to $US1500 in 2011.
Source: Reuters
