Gold Reached All-time High, on Crude Oil, Dollar (Bloomberg) (08-01-2008)

Jan. 8 (Bloomberg) -- Gold rose to a record in London and New York as higher crude oil and a weaker dollar as investors seek to buy as a hedge against inflation.

Gold for immediate delivery rose as much as $17.84, or 2.1 percent, to $876 an ounce in London, exceeding the previous record of $868.89 set Jan. 3. The metal traded at $873.40 as of 9:47 a.m. in London. Gold for February delivery rose as much as $16.80, or 2 percent, to $878.80 an ounce on the Comex division of the New York Mercantile Exchange.

Spot prices advanced 31 percent last year, the biggest gain since 1979, when U.S. inflation was more than 13 percent. U.S. consumer prices increased 0.8 percent in November, the most in more than two years. Inflation in the 13-nation euro region accelerated to 3.1 percent in November, the fastest since 2001, according to Eurostat.

The dollar has declined against all but one of the world's 16 biggest currencies in the last 12 months.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Jan. 1, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 199,438 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- long positions rose by 15,063 contracts, or 8 percent, from a week earlier.

Gold became part of the world's monetary system in 1944 when the Bretton Woods agreement made the dollar convertible to a fixed gold price of $35 an ounce and other countries fixed their currencies to the dollar.

The gold price was fixed at $35 an ounce until 1968. U.S. President Richard Nixon closed the `"gold window" in 1971, stopping the controlled trading of gold. By the end of 1979, gold was above $500 an ounce.

You can read more here