Gold rose to all-time high on Thursday as investor buying speeded up after the dollar sank and oil hovered near lifetime peaks.
Gold rose to $992.70 an ounce before easing to trade at $991,60/992,0 at 11.08am GMT, against $981,90/982,70 late in New York on Wednesday.
”Right now the dollar is the main driving factor behind the move, but the gold price has risen surprisingly little given the dollar weakness,” said Walter De Wet, analyst at Standard Bank.
Increased supply of scrap gold and a sharp drop in physical demand because of high prices were putting a cap on the price rally, he said.
”If the dollar stays at this level, we might see $1 000 very soon, but if it retraces, it’s going to become difficult.”
The dollar hit fresh depths, hammered to a 12-year low versus the yen and record troughs against the euro on mounting worry about the health of the US economy and financial sector.
The dollar’s slide came despite remarks from US President George Bush on Wednesday that he would like to see a stronger dollar and expressed concern its falling value was one cause of soaring US energy prices.
Market expectations for aggressive Fed rate cuts next week have also continued to hamper the dollar.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Oil prices held steady near $110 a barrel, trading just below a record high as a weak dollar overshadowed an increase in US crude inventories.
”The gold market is now firmly in the hands of investors, with their sentiment [and the price] being driven by global macro-economic trends,” Fortis Bank said in a market report.
”Every bit of bad US economic data boosts gold in two ways. First because it reinforces the return of its role as a safe-haven asset, and second because the dollar falls on expectations of further Federal Reserve rate cuts.”
Sharp price gains
Gold has jumped 19% this year on top of a 32% rise in 2007, mainly on inflation worries following firm oil prices and chances of more rate cuts in the United States, which elevates gold’s appeal as an alternative investment.
”Given the return of credit market liquidity worries and supportive movements in both oil and the dollar, it looks as if the corrective phase in gold has come to a close,” said James Moore, analyst at TheBullionDesk.com.
Jewellers were on the sidelines, but dealers in Japan saw purchases from the electronics sector. Gold-plated connectors are an integral part of plugs and sockets, and the metal is also used in wiring to connect parts of semiconductors.
In industry news, number two gold producer Newmont Mining Corp said global gold mine output will decline over the next decade or so because of production constraints and past underinvestment in finding new resources.
Official data showed that South African gold output fell 16,5% in volume terms in January compared with the same month the previous year.
Platinum rose to $2 100/2,110 from $2 060/2,070 an ounce in New York, while silver was at $20,50/20,55 an ounce, against $20,04/20,09. Spot palladium rose to $510/515 an ounce from $496/501 in New York. – Reuters