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Metals - Gold races to record near 915 usd

Monday, January 14, 2008

LONDON (Thomson Financial) - Gold raced to a series of fresh records above 910 usd per ounce as economic uncertainty fuelled investment and as the dollar remained weak.

The precious metal, which has gained around 60 pct since this time last year, rose to a record 914.10 usd per ounce this morning.

Dollar weakness spurred buying as it made gold and other commodities denominated in the greenback relatively cheaper. Elsewhere, gold rose in line with the higher oil price which increased the metal's appeal as a hedge against inflation.

Global economic uncertainty, meanwhile, spurred safe-haven buying and expectations the US Federal Reserve will cut its main interest rate by half a percentage point this month kept the dollar weak, in turn helping gold's rally.

Gold has become the "third reservable currency in the world, following the US dollar and the euro... in a world of economic and political confusion, gold reigns," said Dennis Gartman, editor of daily trading note The Gartman Letter.

US economic weakness, stemming from the subprime crisis has, in part, weakened the dollar while the financial turmoil itself has fuelled gold-buying as a safe-haven.

Investors have been keen to buy gold which can be used to either store value or as an asset they can liquidate in times of turmoil to raise cash to cover losses.

"With uncertainty regarding the future path of US economic growth, the current economic woes should continue to support the metal for now," said Standard Bank analyst Walter De Wet.

Some analysts warn, however, that gold could be in store for a sharp price-decline, or correction lower, because it has rallied so strongly in recent weeks.

"It is clear that there are very large speculative positions present in gold and that gold is vulnerable to a sharp correction in price at any time," said analysts at UBS. "All three other precious metals are sitting with large long positions at the moment and are vulnerable to sharp declines. The trigger for such a move would likely come from the gold market although... we have no sense of the timing of such a move," they added.

At 11.47 am, spot gold was trading at 911.55 usd per ounce against 885.60 usd in late New York trade Friday, having hit its record 914.10 usd earlier in the session.

Elsewhere, platinum was up at 1,583 usd an ounce from 1,560 usd, having hit a record of 1,590 usd this morning.

Platinum followed in gold's footsteps as dollar weakness fuelled buying. A tight fundamental outlook also helped the metal's run up.

"Given the tight fundamentals following last year's supply disruptions and the launch of Exchange Traded Funds products, the white metal will remain underpinned in the coming months, and could easily push above 1,800 usd/oz should the market tighten further," said James Moore, analyst at TheBullionDesk.Com.

Palladium was lower at 376 usd from 377 us per ounce, while silver rose to 16.52 usd per ounce against 16.25 usd, having hit 16.57 usd per ounce earlier -- its highest price since April 2006.

Posted by MOHAMED SAID at 4:59 AM  

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