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December 07, 2005 

Real growth in real money

Gold has surged as investors switch from traditional financial securities such as shares and bonds into gold and other commodities for bigger returns and on fears about inflation and economic growth.

"The general feeling of insecurity has been pushing many people to re-allocate parts of their assets into gold and that has been feeding the trend," said Frederic Panizzutti, analyst with Swiss-based MKS Finance.

Spot gold rose to a high of $517.30 an ounce before pulling back Dec. 7, the highest since April 1981, up from New York's close of $510.90 on Dec. 6. Gold prices have gained 17 percent so far this year and doubled in about five years. Plans by some central banks to increase their reserves have also lifted the metal. Russia, Argentina and South Africa have expressed their intentions to increase their gold holdings, reversing a six-year trend of central bank sales.

Silver has followed gold and increased 38 percent in 2005. Spot spiked to $8.86 an ounce, its highest in more than 18 years

"Gold is getting more and more intrinsic appreciation as a currency than it is as a precious metal," said Philip Manduca, who helps manage about $300 million at Titanium Capital in London.


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