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Gold could fly further, but brace for rocky ride Frank Tang NEW YORK (Reuters) - Last November, the gold market was mostly going nowhere. This month it has been on a one-way street to 28-year highs. The dramatic rise has been fueled by a perfect storm for bullion -- inflation fears on record crude oil prices, a tumbling dollar and safe-haven buying due to feeble stocks and credit market jitters. Commodity experts agree that bullion will no doubt eclipse the all-time record of $850 and even test the unchartered waters of $900 or $1,000, as its stellar performance has now attracted strong market interest as an alternative investment.
"The big reason gold is in a bull market is that it has the potential to become a recognized asset class by the institutional market," said Robert Lutts, president and chief investment officer of Cabot Money Management in Salem, Massachusetts, which manages $500 million of client assets. However, market watchers also warn that an eventual price correction could be brutal, especially if the support of a dollar slump and crude rally disappears. David Rinehimer, director of Citi Futures Perspective in New York, said that bullion was boosted by flight-to-quality demand as global stocks were pummeled after huge write-downs in mortgage-related assets by financial institutions. Rinehimer said that buying gold could also be a strategy to invest in the commodity markets, as bullion usually tracked crude oil. He added that the price of gold had been the most sensitive to the rising energy markets. "Don't expect a top in the gold market until you see some indications of a top in the crude oil market. The gold market will continue to go up to new highs as long as it keeps pace with the crude oil market," Rinehimer said.
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