London: Gold prices hit 18-month highs for a second consecutive session on Thursday as the dollar slid to one-year lows versus the euro, fuelling buying of the precious metal as an alternative asset.
Traders said if dollar weakness persisted, the precious metal’s previous record high of $1,030.80 an ounce was likely to fall, despite a lack of physical buying and slower demand for gold-backed exchange-traded funds.
Spot gold rose to $1,020.55 an ounce at 3 pm IST (0932 GMT) from $1,016.70 late in New York on Wednesday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $2.40 to $1,022.40 an ounce.
Industrial precious metals platinum, palladium and silver also rose, benefitting from a better outlook for industrial production. Platinum and palladium hit their best levels since September 2008, while silver reached a 13-month peak.
Commerzbank analyst Eugen Weinberg said as long as dollar weakness persisted, gold’s run higher was likely to continue.
“It is realistic that we will see (the record high) in the course of the next couple of days, and should that fall, probably even more speculative money will flow into the market,” he said. “Momentum is very strong and positive.”
However, given the weakness in underlying demand for the metal and rising scrap levels, the rally may not ultimately be sustainable, he said.
The dollar hit a one-year low versus the euro on Thursday, while the dollar index, which measures the US unit’s performance versus major six currencies, fell 0.20%.
Renewed optimism over the economic outlook after better than expected data from Japan and the United States boosted interest in assets seen as higher-risk, like commodities, equities and higher-yielding currencies.
Asian stocks hit their highest level in 13 months, while European shares rose in early trade.
Exchange-traded funds bought more gold on Wednesday, with the largest, New York’s SPDR Gold Trust, reporting inflows of 7.628 tonnes. The trust is the world’s sixth biggest holder of gold, according to World Gold Council statistics.
London’s ETF Securities reported inflows of just over 12,000 ounces into its three gold-backed products on Wednesday.
ETF buying was a key factor driving gold above $1,000 an ounce in the first quarter of 2009, but inflows have tailed off sharply since then and, while firmer, remain comparatively soft.
Among other precious metals, silver rallied to a 13-month high of $17.63, benefiting from a firmer tone to base metals. Silver is widely used in industries such as electronics manufacturing, as well as being an investment metal.
Silver represented increasingly good value to gold as the rally continued, with the gold to silver ratio falling to 58.4 from around 64.5 a month ago.
“Silver and platinum are getting a leg up not just from gold but from the improving industrial production outlook, so they have done even better than gold,” Citigroup analyst David Thurtell told Reuters Television.
“The gold-silver ratio can push even further down, probably into the low 50s from the high 50s now.”
Spot silver was bid at $17.51 an ounce against $17.35 on Wednesday.
Platinum, chiefly used in car manufacturing as an autocatalyst, built on recent gains to reach a one-year high of $1,348 an ounce.
ETF Securities said it saw an inflow of more than 8,500 ounces into its platinum-backed ETC on Wednesday.
Spot platinum was at $1,342 an ounce against $1,344.50, while palladium was at $300 against $296, a 12-month high.