LONDON, Dec 12: Gold fever drew more investors into the bullion market on Monday as another bout of heavy buying in Japan helped push prices above $540 an ounce and to their highest in nearly a quarter of a century.

The rally in gold, which has lifted prices by over 20 per cent this year, has spilled into other precious metals, with platinum hitting its highest since March 1980 and silver trading at its firmest since May 1987.

Fund managers have been buying gold as part of a strategy to diversify portfolios, while other investors have speculated about potential purchases from some of the world’s central banks — previously long-time sellers.

Spot gold rose to $538.00/538.75 an ounce by 1105 GMT, off an earlier peak of $540.90, the highest since March 1981, but still up two per cent from $526.50/527.20 in New York on Friday.

Some of the US funds are now taking profits, but the Japanese are still buying, said Jeremy East, global head of precious metals at Commerzbank.

The sharp price acceleration since mid-November has come from heavy buying from Japan. Some believe investors there are shunting into gold due to concerns about currency weakness.

In fact, I don’t think a lot of people understand what is going on in the market — even those who are trading it in Japan. It is feeding on itself and it will stop doing that at some point, but I just don’t know when.

The Tokyo Commodity Exchange (TOCOM) said on Monday it would impose an extraordinary trading margin on gold futures from Wednesday to check volatility in the market, a decision that initially knocked gold from its highs.

Gold has been less affected by currency moves lately but some dealers are keen to see the outcome of the US Federal Reserve’s meeting on Tuesday, which might mark an important change in monetary policy.

Platinum rose to $1,010/1,014 an ounce from $1,000/1,004 in New York and earlier set a new peak of $1,015. Palladium rose to $294/298 from $286/289.

Silver was trading at its highest since May 1987 at $9.14/9.17 an ounce versus New York’s $9.01/9.04. —Reuters