Gold Hits New High, USD Rebounds


"Gold briefly powered to a record above $1,398/oz. in Asia."

Gold hit a new high on Monday, stoked by rising inflation expectations following the Federal Reserve's return to asset buying, and the dollar gained in a hangover from last week's relatively upbeat U.S. jobs data.

World stocks as measured by MSCI were down 0.2% after last week hitting levels last reached prior to the collapse of Lehman Brothers. Emerging market stocks were flat.

Wall Street also looked set to open lower. Investors were digesting an idea floated in The Financial Times by World Bank President Robert Zoellick that leading economies should consider readopting a modified global gold standard to guide currency movements.

Gold briefly powered to a record above $1,398/ Asia, mainly driven by concerns that the Fed's renewed quantitative easing program will stoke underlying inflation. The metal later was down about a quarter of a percent.

Ong Yi Ling, analyst at Phillip Futures in Singapore, said gold prices had barely reacted to Zoellick's comments. "Going forward that would be something that we could look toward, but it's not going to happen within a short period of time."

The dollar is also widely seen weakening as a result of the $600 'QE2' billion program, which essentially entails printing more money. Gold tends to rise when the dollar is weak.

On Monday, however, the U.S. currency was up 0.6% against a basket of major competitors, recouping recent losses following better than expected U.S. jobs data on Friday.

"As we've had a good run on positive US data, the market is buying back an oversold dollar," said Keiji Matsumoto, strategist at Nikko Cordial Securities.

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