Gold sets record high above $1,040 per ounce

Gold sets record high above $1,040 per ounce
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First Published: Tue, Oct 06 2009. 11 58 PM IST
Updated: Tue, Oct 06 2009. 11 58 PM IST
London: Gold surged to a record high above $1,040 (Rs49,088) per ounce (28.35g) on Tuesday, with buying fuelled by dollar weakness after a report, later denied, that Gulf Arab states were considering abandoning the US currency for oil trade.
Both spot gold prices and US gold futures have benefited from a convergence of factors including the dollar’s decline, technical buying momentum and worries about potential inflation as central banks struggle to emerge from unprecedented fiscal stimulus measures.
“In an environment where interest rates are virtually zero, the incremental cost of moving into gold is nil. It stands to reason for investors that gold is more desirable,” said Jack Ablin, chief investment officer at Harris private bank in Chicago.
Spot gold hit a historic $1,042.55 per ounce and was last up 2.2% at $1,038.80, compared with $1,016.65 quoted late in New York on Monday.
US gold futures hit a record high, while the metal also hit six-month highs when priced in sterling and euros, breaking above 700 euros an ounce for the first time since early April.
A positive technical picture for gold fuelled buying on the fund side, traders said. However, the weight of near-record long positions in New York gold futures still leaves the market vulnerable to a correction.
The dollar slipped sharply after UK newspaper The Independent said Gulf Arab states were in secret discussions to end the use of dollars in oil trading.
Peter Fertig, a consultant at Quantitative Commodity Research, said the final quarter was typically strong for gold, due to rising jewellery demand—a weaker than usual factor this year—and as the dollar is seasonally soft.
“That is the major driver of investment demand,” he said.
“The speculation, even if it has been denied, that Gulf states would like to peg oil prices to a currency basket and not the US dollar alone has been a positive factor for gold, while weakening the dollar against other major currencies.”
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First Published: Tue, Oct 06 2009. 11 58 PM IST
More Topics: Gold | Bullion | Commodity | Sterling | Euro |