LONDON, Sept 19: Gold prices surged this week as precious metal profits from its status as a safe haven in times of economic turmoil.

Gold prices surged 85 dollars an ounce, or 11 per cent, on Wednesday -- the largest one-day increase for 28 years.

“Gold staged its biggest one-day move since 1980 as the metal saw a surge of safe-haven buying,” said James Moore at TheBullionDesk.com.

The price of gold stood at 863 dollars an ounce late in London on Thursday, compared with 813 dollars just 24 hours earlier.

The yellow metal, which is used in jewellery, dentistry and electronics, remains below its record high of 1,032.70 dollars an ounce, reached on March 17, four days after it had breached 1,000 dollars for the first time.

Gold was also in the headlines earlier this year after the precious metals consultancy GFMS revealed that China had been the world’s biggest producer of gold in 2007, overtaking South Africa which had held top spot for 100 years.

On Wednesday, GFMS forecast that gold could soon reach 950 dollars an ounce but was unlikely to hit a new historic peak in 2008.

“I’d be far from surprised if we see a further bank failure or two in the next few months. Add that to an unwinding of dollar gains and you should see gold back over 900 dollars and maybe 950 dollars,” GFMS executive chairman Philip Klapwijk said in the group’s latest Gold Survey.

Since striking the all-time high, gold prices have slid below 800 dollars as demand for the metal wanes owing to a slowdown in global economic growth.

But prices are surging once more, helped too because gold is regarded by investors as a sound defence against inflation, which in many countries is driven by soaring oil prices.

A weaker US currency can make dollar-denominated gold cheaper for buyers of the metal holding foreign currencies, in turn pushing up demand for the metal.

“We expect that factors such as financial market concerns, global growth, dollar expectations and inflationary pressures are likely to continue to dictate investor sentiment towards gold and in turn drive prices,” analysts at Barclays Capital wrote in a research note to clients. Gold prices soared to record highs earlier this year partly owing to supply problems in South Africa.—AFP