Uncertainty

Great news, commodity traders, gold is now at its highest price since the last time a detached lunatic was in the White House.

At the COMEX division of the New York Mercantile Exchange, December gold spent most of the session lower, but settled up 80 cents at $499.10. It reached $502.30, the highest benchmark futures price since late 1987, in screen trade overnight.

"I don't know what to expect for year end," said Bruce Dunn, a trader at New York bullion trading firm Auramet. "Either they are going to try to push it one more time or you could see some massive liquidation. The funds are very long."

Spot gold closed in New York at $499.70/0.50 an ounce, down from as high as $502.30 an ounce in Asia but up from Monday's late quote at $498.20/499.00.

Analysts said investment funds were increasing their exposure in commodities for better returns, and the trend was likely to continue despite huge speculative long positions.

Gold has risen more than 14 percent so far this year.

"Over time, over history, it has always been a market that people have turned to when there has been an element of uncertainty in other asset classes," said Mark Keenan, fund manager at UK-based MPC Commodity Fund. "It's a question of diversification."

Robin Edwards, president of Saber Fund Management, said people were getting interested in gold as there were inflation fears, though it was hard to say whether that would be realized.

He said gold prices could soar up to $800 an ounce over the next couple of years as the metal had supportive fundamentals.

Inflation fears? Perhaps. Or maybe it's when a highly respected military analyst describes the war in Iraq as "...the most foolish war since Emperor Augustus in 9 B.C [sic] sent his legions into Germany and lost them..."

A little thing like that, traders may be thinking, could have a bit of an effect on the "safety" of the good ol' greenback.