Beijing, Dec. 9 (Xinhuanet)-- Gold prices on Thursday galloped to a new 24-1/2-year high of $518.50 an ounce in Europe as investment funds persisted in buying.

    "Its current stratospheric performance is a combination of three factors -- /strong fundamentals, a rampant commodities sector, with most base and all precious metals at multi-year or all-time highs, and massive investor interest led by the Japanese," Paul Merrick of RBC Capital Markets was quoted as saying by Reuters.

    On the New York Mercantile Exchange, spot gold traded at $515.40 an ounce early Thursday, up $1.10 from Wednesday's settlement price. Spot gold is trading at levels not seen since 1981.

    Buying interest has been especially strong on the Tokyo Commodity Exchange, traders said, encouraged by recent weakness in the Japanese yen.

    Gold is denominated in the U.S. dollar, so when the dollar strengthens versus the yen as it has in recent weeks, gold's worth in yen increases.

    Gold has surged as investors switch from traditional securities such as shares and bonds into gold and other commodities for bigger returns and on fears about inflation and economic growth.

    The price of gold has gained about 20 percent this year and has doubled in about five years.

    "Momentum traders will not want to sell -- if this month's trajectory continues then gold will be at $568 by year-end and $649 by the end of February," Merrick said. Enditem

    (Agencies)