BackGold hits 28-year high as oil bounces towards record
Gold hits 28-year high as oil bounces towards record
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Singapore: Gold rallied to its highest in nearly three decades on Tuesday (6 November) after crude oil jumped more than a dollar on supply concerns, and dealers said worries in the US credit market will also ignite safe-haven buying in coming days.
Silver hit its best level in almost 18 months to track gold’s strength. High prices sparked sales of gold scrap from Indonesia and Thailand to Singapore, a centre for bullion trading in Southeast Asia, but dealers also noted speculative buying.
Spot gold hit an intraday high of $814.10 an ounce, its best level since January 1980, before slipping to $813.50/814.25 an ounce, higher than $808.80/809.60 late in New York.
Gold extended a rally on Monday, when safe-haven buying gained pace due to falls in equities markets amid fears that the credit crisis stemming from the subprime mortgage problem could wreak havoc at US banks.
“Although charts are in an overbought territory, the momentum indicators are currently too strong at the moment to call it a top. Immediate resistance is around $812 and $820," said Pradeep Unni, an analyst at Vision Commodities in Dubai.
“Investment demand has seen a massive surge especially after the $750 level was comfortably breached. This may only surge further with the breach of $800," he said. Gold’s 14-day relative strength index (RSI) has risen above 70 as gold hits highs. It stood at 72.28 on Monday. The market views an RSI of 30 or less as oversold and 70 or more as overbought.
US crude rose $1.22 to $95.20 a barrel, moving towards the record high of $96.24 hit last week as Asian stock markets steadied and dealers expected U.S. oil inventories to fall ahead of winter
Gold is riding high on a struggling dollar after the Federal Reserve cut interest rates, record-high crude, Turkey’s threat of an incursion into Iraq to deal with Kurdish rebels and recently, fears that the U.S. subprime mortgage crisis was worsening.
The benchmark contract in Tokyo gold futures rose above the closely watched 3,000 yen per gram level for the first time since July 1984. The October contract on the Tokyo Commodity Exchange ended 30 yen higher at 3,015 yen.
“The price of gold is being fuelled by a declining interest rate environment and also injection of excess liquidity," said William Kwan, a dealer at Phillip Futures Pte Ltd in Singapore.
Physical buyers such as jewellery makers may wait for gold to fall below $800 before buying again but the metal’s strong fundamentals could also trigger demand from speculators and investors, he said.
Last week, the Fed cut interest rates by 25 basis points to 4.5 percent as the central bank tries to limit the broad economic impact of a housing market slump.
The most active December contract on COMEX added $3.0 an ounce to $813.8. Gold was also supported by supply concerns after a spate of deaths in South Africa’s mines set the 300,000-strong National Union of Mineworkers and mining firms on a collision course.
Gold hit an all-time high of $850 in January 1980, when investors snapped up the metal in the face of high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution.
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