Tokyo: Gold hit a historic high for a second straight day on Wednesday as investment funds ploughed money into the market on the metal’s bullish trend, supported by a weak dollar and strong oil prices.
Spot gold surged to a new record of $891.40 an ounce, surpassing the previous record of $881.10 reached on Tuesday, with the market gaining momentum after the key Japanese gold futures price hit its highest level since March 1984.
The debut of gold futures on the Shanghai Futures Exchange helped boost the spot price to the high.
Bullish gold prices also pushed up cash platinum to an all-time high of $1,556 an ounce, $1 more than the previous record hit on 4 January.
Gold drifted down from the high, but traders were keen to buy the metal on dips.
By 0845 GMT, cash gold was trading at $885.00/885.70, compared with late New York levels of $878.10/878.90.
“Gold is bullish. Funds are pouring into markets as they are performing well when stocks are slumping,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.
“The speed of gold’s rise is very fast but the market is focusing on taking gold towards $900 in the near term.”
COMEX gold futures rose in line with the spot price in Asia. The most active February contract was up $5.20 or 0.6 percent from New York at $885.80.
The key gold futures contract for December 2008 delivery on the Tokyo Commodity Exchange (TOCOM) finished at 3,134 yen a gram, up 37 yen or 1.2 percent from Tuesday.
It had reached an intraday high 3,173 yen, the highest for a benchmark since March 1984.
Tokyo traders said investment funds are putting money into gold and other commodities from the start of the year, anticipating for a big return.
“Funds are buying. For instance, index funds are rebalancing their portfolios at the start of the year, putting more funds into gold and commodities based on their performance last year,” said Hiroyuki Kikukawa, an analyst at IDO Securities in Tokyo.
Gold rose more than 30% in 2007, its biggest annual gain since 1979.
Shanghai gold launch
Gold was gaining in appeal as the market sought higher returns with US shares slumping and prospects for the US economy deteriorating, especially after poor jobs data last week.
US stocks fell sharply on Tuesday after phone company AT&T said it was experiencing softness in its consumer business, sparking more concerns about the economy.
Investors were also convinced to buy gold due to lingering geopolitical tensions in the Middle East, rising energy prices and weakness in the dollar.