Gold Races to New Historic High
ATUL PRAKASH
Reuters
February 28, 2008 at 5:08 PM EST
LONDON — Gold raced higher to an historic high above $965 (U.S.) an ounce on Thursday as the U.S. dollar's slump to record lows and strong oil prices boosted investor buying, analysts said.
Silver hit a 27-year peak above $19.75 an ounce, palladium hit a 61/2-year high and platinum bounced back after falling more than 2 per cent to a one-week low.
Spot gold rose as high as $966.70 an ounce and was at $966.00/966.90 at 1614 GMT, against $957.50/958.30 late in New York on Wednesday.
“Gold is pretty much tracking the euro/dollar moves and funds and investors will keep buying the metal until it gets to $1,000 an ounce,” said David Thurtell, analyst at BNP Paribas.
“Markets for equities, property and corporate bonds are very poor. Cash will earn you less and less in interest. Investing in gold is an obvious choice when other asset classes are not doing that well,” he said.
The dollar fell to a record low versus the euro as weak U.S. economic data fuelled recession fears and raised expectations that Federal Reserve will cut interest rates again.
U.S. fourth quarter gross domestic product was revised lower and surprisingly big jump in initial weekly jobless claims added to concern about the economy and increased the likelihood of rate cuts.
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 rose above $102 a barrel to new record highs as the U.S. dollar sank to a new low and after a supply cut in Nigeria, Africa's top exporter.
“Gold should remain pretty well supported. If the dollar weakens further, then definitely we will see an acceleration in the upside trend. We see a range between $950 and $1,000.” said Frederic Panizzutti, precious metals analyst at MKS Finance.
Gold has gained around 16 per cent this year on investor demand driven by record high oil prices and the possibility of more interest rate cuts, which has raised the metal's appeal as an alternative investment.
In the physical sector, selling from retail investors in Japan slowed down on expectations there was room for gold to rise further, while dealers in Singapore noted light selling from jewellers in Indonesia and Thailand.
Gold bars were offered at a discount of 25 U.S. cents an ounce to the spot London prices in Tokyo.
In other metals, platinum was last at $2,135/2,140 an ounce after falling as low as $2,084, against $2,130/2,140 in New York. It hit a record of $2,192 on Feb. 22 as persistent power supply problems disrupted mining in South Africa, the world's top producer.
“We continue to believe that prices will trend higher into the second quarter, but should soften in the second half of this year,” Standard Chartered Bank said in a report.
“Some of the short-term problems in South Africa should be overcome by then, and consumption is likely to be dented by higher prices in some sectors such as jewellery. Despite this, platinum is expected to remain fundamentally tight and prices should trend higher once more heading into 2009.”
In market news, Zurich Cantonal Bank said its palladium exchange traded fund attracted much more money than expected, and its platinum fund was catching up as investors bet on even higher prices.
Silver rose as high as $19.77 an ounce and was last at $19.71/19.76, versus $19.22/19.27 on Wednesday. Palladium hit a high of $560/564 an ounce, up from $550/555.
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