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Tumbling dollar, inflation and short supply behind gold rally
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US consumer prices rose 4.1 percent last year, the fastest growth since 1990, and latest US data showed inflationary pressure picked up recently.

The drivers for gold remain as investors buy precious metals to create a safe haven against inflation, a US futures analyst said.

Besides, short supply has also contributed to the surge of gold. Supplies were not sufficient due to fast growth of investment demand and a limited increase in output.

Gold output stood at 2,477 tons in 2006, hitting a 10-year low. At the start of the year, power shortfalls forced some gold mines in South Africa, the world's second largest gold producer, to suspend production, leading to gains in gold price.

Back in the 1980s, gold reached 873 dollars an ounce, which is tantamount to 2,235 dollars now when inflation is taken into account. Given that, many analysts believe the current price is still well below historic highs and could rise further.

But other analysts warn risks may accumulate with every gain in gold price. The price could fall on profit-taking, they said.

(Xinhua News Agency March 17, 2008)

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