Gold tops $1,900 as buyers pile on

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Gold topped another century mark Monday in its summer price surge, rising above $1,900 an ounce for the first time.

The metal traded as high as $1,917.90 in afternoon electronic futures trading. In the regular futures session the near-term contract closed up $39.80, or 2.1%, to a record $1,888.70.

The price has risen for six straight sessions and seven straight weeks. Gold topped $1,800 for the first time last week. The $1,600 mark was crossed in mid-July.

Year to date the metal is up a stunning 33%, from $1,421 at the end of last year.

Another milestone: The SPDR Gold Trust exchange-traded fund (ticker symbol: GLD) has become the largest ETF by market value, exceeding the SPDR S&P 500 ETF (SPY), which tracks the Standard & Poor’s 500 stock index.

The gold fund’s market value reached $76.7 billion on Friday, compared with $74.4 billion for the S&P 500 fund, according to Bloomberg News data.

By now, everyone knows what’s driving gold: pretty much everything.

Take your pick: diving stock prices worldwide, fear of recession, fear of a European banking-system meltdown, distrust of central banks and paper currencies, nervousness over Standard & Poor’s downgrade of U.S. government’s debt rating, disgust with rock-bottom short-term interest rates, or . . . add your own reason.

And as last week demonstrated, “Gold seems to go up whether the S&P 500 goes up or down, and whether the dollar goes up or down,” said Jeffrey Friedman, a market strategist at MF Global in Chicago.

Momentum in the price of any asset can create more momentum as short-term traders pile on. And gold has the Big Mo now.

“Gold is strong in any and all currency terms and it is now entering that stage when prices go ‘parabolic,’ ” commodities analyst Dennis Gartman wrote in his Gartman Letter on Monday.

But when the price of anything goes parabolic, many investors know to stay away. “When we have a correction it could be violent,” Friedman said.

Remember silver’s spring streak? The “poor man’s gold” shot from $37.70 an ounce on April 1 to nearly $49 on April 29 -- then crashed to $33.50 by mid-May. Silver has been clawing its way back since then, and rose 89 cents to $43.32 on Monday, its highest since May 2.

Gold’s next big test may come on Friday, when Federal Reserve Chairman Ben S. Bernanke is scheduled to speak at the annual gathering of central bankers and economists at Jackson Hole, Wyo.

With the U.S. economy on the ropes, the widespread expectation is that Bernanke will signal the Fed’s willingness, if necessary, to launch another program to pump money into the financial system via purchases of Treasury bonds.

That could further fuel inflation fears and zap the dollar, giving gold’s fans another reason to keep buying.

But if Bernanke sounds reluctant to act, he could give gold owners an excuse to take some of their massive 2011 profits.

-- Tom Petruno

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