Gold added $24,95, or 2,49%, to trade at $1 025,05 by 1.30pm on Monday — this after rising more than 3% to a record $1 032,60 a troy ounce in overnight trade, following news of the near-collapse of United States bank Bear Stearns and another emergency rate cut by the US Federal Reserve, which led the dollar to drop to record lows of $1,5902 against the euro.
“Deepening woes in the global financial system have triggered rampant safe-haven buying of gold and silver overnight with gold testing above $1 030/oz, while silver has set a new 27-year high,” said James Moore, an analyst at the BullionDesk.
He warned that the dollar could come under further pressure as well this week as the Federal Open Market Committee (FMOC) meets again on Tuesday.
“Given the likelihood of further rate cuts at this week’s FOMC meeting, we remain bullish towards gold and anticipate the metal could test as high as $1 150 this quarter as investors seek to offset rising safe-haven/inflationary concerns,” Moore said.
Platinum, however, failed to capitalise on gold’s move, losing $56 to trade at $2 015 an ounce.
While gold’s rally has been fuelled by the falling US dollar and gloomy US economic outlook, platinum’s recent run has been driven by fears over supply constraints due to power shortages in South Africa.
“Despite the fresh highs by gold on Friday, platinum was unable to post any significant gains as strong resistance at $2 120 capped the metal,” said Moore.
The metal also failed to rally on Monday morning despite unscheduled load-shedding by South African power supplier Eskom.
Platinum dipped back to $2 060 and could test back to $2 000 as fund players continue to reduce their exposure, Moore said.
Like its sister metal platinum, palladium failed to post any significant gains on Friday, setting a high of $512 before settling at $502. Further chart support is expected at $485/$465 with resistance now seen at $518/$535, said Moore.
Oil prices have also rallied in response to the dollar’s weakness overnight with Nymex crude setting a fresh all-time high of $111,80 after closing on Friday at $110,21, but by lunch time Brent crude had lost more ground and was trading at $106,54.
“With most major commodities quoted in US dollar terms, the weakness in the US dollar has caused investors to further their crude positions as they hedge against inflation as well as a weaker US dollar,” ETM analysts said in their morning report.
“Despite the risk of a slowdown in US economic growth, a spill-over into the global economy and slump in crude demand, the speculative element within the oil market remains the overriding factor keeping crude futures well supported,” they said.
ETM also warned that on the domestic front, with crude at fresh record highs and the South African rand now decisively above R8 to the dollar, consumers could expect the cost of domestic fuels to “increase quite sharply going forward”.
The ETM analysts forecast an increase of 70 cents a litre to R8,96 in the unleaded-95 inland petrol price. — I-Net Bridge