Gold hits record high on oil

Gold surged to a fresh record high on Tuesday, boosted by firm oil prices, with longer-term trends such as a weakening dollar spurring heavy buying by investment funds.

Spot gold rose as far as $875,80 an ounce, surpassing the previous record of $869,05 reached last week.

Speculative buying intensified after the spot price broke through the previous record, traders said.

As of 8.48am GMT, gold was trading at $873,15/863,85 an ounce, up about 1,6% from $859,70/860,40 late in New York on Monday.

”Gold jumped through the record as funds bought back heavily as the spot price was well-supported above $860 throughout the day,” said Shuji Sugata, a manager at Mitsubishi Futures and Securities in Tokyo.

”We all knew that the outlook for gold was bullish and today’s [Tuesday] rally proves that the market is very strong.”

Comex gold futures prices jumped in line with the spot price after settling down $3,70 in New York on Monday.

The most active February contract was trading up $14,90, or 1,7%, at $876,90 from the New York settlement.

Tokyo traders said gold and other commodities prices tend to be supported in January when investment funds allocate their cash for different markets.

But gold could find its upside potential is limited in the near term as investors appeared to be holding large buy positions already.

Comex gold fell on Monday after a build-up in speculators’ long positions in the gold futures market last week, which signalled that the market could be vulnerable to a correction.

The Commodity Futures Trading Commission said in its latest Commitments of Traders report that the non-commercial net long position rose to 199 438 lots in the week up to December 31, from 184 375 lots a week earlier.

”Gold has been rising too fast, but many people believe that gold will remain supported. There are simply too many reasons to hold gold as fears over inflation were heightened by high oil prices,” said Akira Doi, a director at Daiichi Commodities.

In Tokyo, the key December 2008 gold contract on the Tokyo Commodity Exchange ended at 3 097 yen a gram, up 53 yen, or 1,7%, from Monday’s close of 3 044 yen.

United States crude oil futures rose on Tuesday, paring a loss of more than $4 in the past three sessions as forecasts for an extended decline in US crude stocks last week provided support.

Front-month US crude for February delivery was up 76 cents at $95,85 a barrel in electronic trading, after settling down $2,82 a day earlier.

Platinum advanced in line with sharp gains in Japanese platinum futures. — Reuters

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