Gold hits new all-time high

Gold soared to a fresh all-time high Tuesday morning, bringing it even closer to smashing the psychologically-important $2,000 mark.

The precious metal hit $1,921 an ounce in early morning trading, in the wake of substantial market volatility.

The FTSE 100 (UKX) has seen £82 billion wiped off its value over the past two trading sessions, as fears grow for the state of the European economy.

European shares suffered an even worse fate, due in large part to their close proximity to Italy and Greece, whose troubles have spurred fears for a second banking crisis, while across the globe, Japan's Nikkei fell to a six month low.

Analysts at Commerzbank said the jump in gold values was "driven by concerns about global economic growth and the health of the financial system and the ever-increasing likelihood that central banks will expand liquidity."

Investors were forced to battle a stream of headwinds, including uncertainty over Greece's second bailout, German opposition to the rescue package and protests in Italy undermining confidence in the government's austerity programme.

But this uncertainty has only served to strengthen gold's safe haven appeal and bolstered the belief that it could rise further before the year is out.

The yellow metal is up 35% this year - 12% in August alone - and is set for an 11th year of gains.

Barclays Capital expects prices to initially hit $1,930 an ounce and then rise towards $1,970 an ounce in the near future.

Meanwhile Goldman Sachs said: "We expect gold prices to climb in 2011 given the current low level of US real interest rates. Further, with our US economics team now forecasting slower US economic growth in 2011 and 2012, we expect US real interest rates to remain lower for longer, supporting higher gold prices through 2012.

"Consequently, we recommend near-dated consumer hedges in gold through 2012."

Gold miners

There's good news for investors in gold mining shares too, after the Swiss Central Bank moved to set a minimum exchange rate for its currency.

For more, read: Swiss set aggressive franc target.

Analysts at Collins Stewart said the move "effectively pegs the Swiss franc against the euro" and now removes one of gold's competitors as a safe haven asset.

"This further strengthens the buying case for gold and in particular gold equities that have underperformed the commodity in the last year," the group said in a note. It cited Centamin Egypt (CEY) and African Barrick Gold (ABG) as two of the cheapest buys among the UK-listed gold miners.

Certainly, today's news has prompted a rise in gold mining shares. FTSE 100-listed major Randgold Resources (RRS) rose 1%, while Xstrata (XTA) climbed 1.7% and Hochschild Mining (HOC) gained 2.5%.

Commerzbank said: "The Swiss National Bank's decision should lend tailwind to the price of gold as the (virtually) last haven believed to be safe has thus fallen, now that the Bank of Japan has intervened already several times against a strong yen.

"In addition, the closeness to the psychologically-important mark of $2,000 an ounce should attract more buyers."

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