Gold price hits two-year peak

FEARS of more Enron-style disasters lurking in US markets have prompted investors to scramble for the relative safety of gold, sending the price above $300 an ounce - a two-year high.

In London it reached $306.65 this afternoon after hitting $299 in late US trading overnight, up from $292 in London on Tuesday. It later settled back to $303.75. It was helped by further strong buying by Japanese retail investors.

Dealers said the market was encouraged by evidence that leading producers were unwinding forward sales programmes, a move that will help to alleviate the oversupply problem.

Gold has lost its lustre as a store of value in recent years as institutions have viewed the US dollar as a better hedge against financial uncertainty.

Low inflation and heavy selling by central banks, including the Bank of England, have contributed to the erosion of its traditional role in markets.

'If the price stays above $300 it could get pretty interesting,' one dealer said. Others pointed to the need of many traders to cover short positions once the price topped that level.

The surge underpinned some of the biggest rises on the stock market today - Anglo American, which owns half of Anglo Gold, gained 38p to 1232p and BHP Billiton added 8 1/2p to 398 1/2p.