Gold powers to record high on dollar
Gold set an historic high above $975 on Friday, propelled by speculative buying on the back of record high oil and a lifetime low dollar against the euro.
Silver jumped to a 27-year peak near $20 an ounce, palladium surged nearly four per cent to its highest in more than six years and platinum rebounded from lows to hover near a lifetime high.
Gold set a record for the third straight day, hitting $975.90 an ounce. Gold has risen 16 per cent this year on the top of 32 per cent rise in 2007.
"It looks very likely that we will go above $1,000," Michael Lewis, global head of commodities research at Deutsche Bank said in London.
"The next focus is the degree of Fed easing at the next FOMC meeting on March 18. So that would be another possibility that we would start to see dollar weakness accelerating," he said, referring to the US Federal Open Market Committee.
"There is a non-linear relationship between gold and the dollar, whereby incremental weakening in the dollar has a bigger impact on the gold prices," he added.
The dollar hit record lows against the euro, Swiss franc and a basket of major currencies, weighed down by worries about the US economy and expectations of further aggressive rate cuts.
A surprisingly large rise in weekly US jobless claims on Thursday and confirmation the world's biggest economy barely grew in the final quarter of 2007 fuelled recession fears.
A rate cut tends to weaken the dollar as investors shift from to other assets for better returns. A weaker dollar makes gold cheaper for other currency holders and lifts metal demand. Gold is also seen as a hedge against oil-led inflation.
Oil hit a record peak above $103 a barrel, fuelled by fund money chasing commodities as the US dollar sank and worries mount about supply disruptions.
"While gold's movements over the past 24 hours have pushed the metal back into overbought territory, its does appear that the scale of demand is sufficient to propel gold to $1,000/oz," said James Moore, metals analyst at TheBullionDesk.com.
US DATA AWAITED
While oil is at a record price in inflation-adjusted as well nominal terms, gold has been lagging. According to analysts at metals consultancy GFMS Ltd, gold's inflation-adjusted record high is more than $2,000 an ounce at current prices.
"Another set of weak US economic data is expected to be released today. Thus, the market is likely to price in further US rate cuts and fears that rising inflation would be the result of easier monetary policy," Dresdner Kleinwort said.
"Nevertheless, weaker US economic figures are probably positive for gold, which might rise to a fresh record high. The magic $1,000 level is getting closer in sight."
Investors await personal income and consumption data at 1330 GMT. The National Association of Purchasing Management, Chicago, releases February index of manufacturing activity at 14.45 GMT.
In market news, the Shanghai Gold Exchange, China's largest precious metals bourse, will ease rules for foreign banks seeking membership, an exchange source said.
In other metals, silver rose to $19.92 an ounce and was last at $19.69/19.74, versus $19.74/19.79 in New York.
Platinum rose to a high of $2,161 an ounce and was last at $2,153/2,163, versus $2,135/2,140 on Thursday and last week's record of $2,192.
Platinum, used in jewellery and auto catalysts, has jumped more than 40 per cent this year after mines in South Africa, accounting for 80 per cent of world output, were shut for five days at the height of last month's power crisis.
Palladium hit a high of $582 an ounce before falling to $561/566, against $560.00/564.00 late in New York. (Reuters)
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