August rally lifts gold to near record high

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Gold on Tuesday reached its highest level since June and ended the session within $9 of its all-time closing high, continuing to benefit from investors’ worries about the global economy’s next turn.

Near-term gold futures in New York rallied $11.20, or 0.9%, to $1,248.30 an ounce, bringing the gain for August to 5.6%.

The metal is on track for its fifth straight weekly advance, and needs to rise just 0.7% to match its record close of $1,257.20 on June 18.

The SPDR Gold Shares Trust, the most popular gold exchange-traded fund, rose $1.17 to $122.08 on Tuesday. The fund, designed to track the price of bullion, is up 13.8% this year -- a gain that beats most of the other alternatives likely to be in the average investor’s portfolio.

The blue-chip Standard & Poor’s 500 stock index is down 5.9% in price this year after losing 4.7% in August. Most categories of bond mutual funds are up between 3.5% and 9% year to date.

Gold and bonds have won at the stock market’s expense this summer as investors have sought relative safety amid a raft of data pointing to a slowing U.S. economy.

Although gold historically has been viewed as a hedge against inflation, this year’s bigger concern -- deflation -- hasn’t deterred buyers, as I noted in this post.

The metal’s detractors say gold has become a dangerous bubble after nine straight years of gains, while bulls are forecasting a price of $1,500 next year, according to a new Bloomberg News survey.

One scenario that could cause people to abandon gold in droves would be a rebounding economy without inflation pressures, accompanied by a rising dollar.

Absent signs of that scenario on the near horizon, many investors may continue to see gold as an insurance policy against a lot of worse outcomes.

-- Tom Petruno