The gold price broke through the key psychological ceiling of $500 an ounce on Tuesday to a fresh 18-year high, as platinum prices rose above $1 000 for the first time in more than a quarter of a century in a broad metals rally.
Gold touched $505,40/oz in Asia — a level last seen in December 1987 — while platinum soared to a high of $1 004/oz, which the precious metal last traded at in 1980.
However, both metals eased in later trade owing to what analysts described as a bit of a correction.
Nevertheless, dealers are still expecting gold to go to $510/oz before the end of the year.
At 12.45pm, gold was quoted at $496,90/oz from an overnight close of $498,70/oz, while platinum was at $992,50/oz from a previous close of $991/oz. Palladium was quoted at $262/oz from a previous close of $262,50.
AFX quoted John Person, president of National Futures Advisory Service, as saying demand for gold “stems from both an investment perspective and from outright jewellery purchases”.
Indeed, “every reason imaginable for buying gold has been used the past week or so”, said Ned Schmidt, editor of Value View Gold Report.
Citing “window dressing” by investment managers as well as “momentum buying”, Schmidt said gold prices are pushing toward an overbought condition.
AFX quoted dealers, however, as saying gold could pull back from these levels, providing investors the opportunity to enter the gold rally at lower levels.
They said record long speculative positions on the Chicago Commodity Exchange and the Tokyo Commodity Exchange should provide a warning.
“It feels like it is going to correct at one stage, but I don’t think it will get below $475 an ounce as the trend is up,” Tricom senior client adviser Ashok Sekar told XFN-Asia.
London-based Numis Corporation analyst John Meyer said in a market note that recent comments from the Russian central bank, along with some visible central-bank buying activity, is adding to inflation-inspired investor demand for gold.
He noted that gold production continues to fall in South Africa as the strong South African rand, combined with ongoing inflation, hits margins — causing more shafts to close or pull back production.
Meyer said in this environment, with such strong fundamental support, it is not hard to see why the gold price is on an upward trajectory.
“I feel when gold will get a real kick along is when we start getting firmer evidence that the United States is at the end of its tightening cycle,” Ashok said.
Dealers expect the Federal Open Market Committee to raise interest rates by 25 percentage basis points at each of the meetings on December 13 and at the end of January, lifting the Federal Funds rate to 4,5%.
They said the Federal Reserve will likely halt its tightening cycle at the end of January and then assess a few months of data, giving added impetus for gold to rise against the dollar. — I-Net Bridge