GOLD soared to its highest level in almost 25 years yesterday as investor appetite showed little sign of abating.

Gold trading in London closed at $515.70 an ounce after trading as high as $522.90/oz during the day — the highest level since April 1981. Some analysts are already predicting that gold could climb to $525/oz next year. The precious metal traded as high as $523.90/oz in New York last night.

Gold has gained $60/oz over the past month but still lags the record high of $873/oz in January 1980.

Driving the surging gold price are investors who are buying the metal to protect against a weaker US dollar, as well as in response to inflationary fears. Gold has long been regarded as an investment safe haven during times of inflation, while academic studies have also shown it to be a natural hedge against the US dollar.

There is market speculation that several central banks, including the ones of South Africa and Argentina, are about to buy more gold to shore up their asset positions. Russia’s central bank said last month that it may double its gold reserves.

Demand for gold jewellery has also been increasing.

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