LONDON, Jan 2: Unrest in Pakistan, a faltering dollar and surging oil futures sent the price of gold soaring to a record high on Wednesday, beating its previous highest level set 28 years ago.

The precious metal rose to 859.20 dollars an ounce, smashing its peak of 850 dollars reached on January 21, 1980. It later slipped back to $857.75 on profit-taking.

Price movements were slightly exaggerated by the lightness of holiday trade, which meant large transactions could influence the market more than usual, analysts said.

“Although conditions remain on the thin side ... (gold’s) move suggests that funds may have made additional moves into bullion with Pakistan remaining on edge and investors nervous about financial markets,” said Kitco Bullion Dealers’ analyst Jon Nadler.

“A sharp rise in crude oil ... and a softer US dollar” contributed to gold’s rally, he added.

Political unrest in Pakistan has led to interest in gold because the precious metal is regarded as a haven in troubled times.

The yellow metal spiked to its record in 1980 as investors rushed to buy gold because of high inflation sparked by soaring oil prices amid the Iranian revolution.

Gold prices were also winning support from a weak dollar, which fell against the euro on Wednesday in the wake of disappointing US manufacturing data, dealers said.

A falling US unit encourages demand for dollar-priced commodities such as gold because it makes them cheaper for buyers using stronger currencies.

Higher oil prices also encourage the buying of gold.

Gold is seen as a defence against inflation, which is being driven in many countries by higher oil prices.

The price of gold is also rising sharply because of increased jewellery purchases in emerging economic powerhouses China and India, according to the World Gold Council. —AFP