LONDON, Nov 29: The price of gold rose above $500 an ounce for the first time for 18 years on Tuesday, propelled by strong buying from investment funds.

Gold hit $502.30 in overnight Asian trade before staging a retreat during European trading hours. The price was the highest since December 14, 1987 when it had touched $502.97.

“At last, gold has breached the fabled $500-level,” said Barclays Capital metals analyst Yingxi Yu, adding that the level had been reached owing to aggressive fund buying.

Gold prices stood at $496.20 during Tuesday afternoon trade on the London Bullion Market.

Sharply increased demand from investment funds has pushed gold prices higher in recent months amid creeping inflation in the United States.

HSBC metals analyst Alan Williamson added: “We’ve seen very, very strong investment demand out of Asia and out of New York in the last few days.”

Heightened demand also pushed platinum to a 25-year high point on Tuesday, breaching $1,000 to reach an intra-day $1,004 per ounce on the London Platinum and Palladium Market, a 19 per cent rise since the start of 2005.

According to London-based metals consultancy GFMS, the physical gold market is in surplus. Physical supply supports industrial and jewellery production.

Gold supply was about 200 tons higher than physical demand during the first half of this year, the GFMS said.

But when investment purchases are taken into account, gold demand outweighs supply, analysts said.

“The sentiment remains incredibly bullish towards gold,” Williamson noted.

He added: “It is principally investment demand. Physical demand has been very quiet since gold has started moving higher.

“In fact, the underlying physical market is probably in surplus at the moment. So it is very much speculative and investment driven.”

Gold was benefiting its safe-haven status, with investors ploughing funds into the market to safeguard their money in times of higher inflation, analysts added.

Yu said: “Recently investors... have found a myriad of reasons for gold to continue rising, including inflationary risks, energy-price led economic slowdown, bird flu, dollar correction, Middle East buying due to increased oil revenues, central bank buying and so on.”

Gold prices reached as high as $509.25 in February 1983, but the metal’s all-time record of $873 per ounce was struck in January 1980.—AFP