LONDON (Thomson Financial) - Gold rose to its highest value since April 29
as record high prices stoked inflation fears and as the dollar remained at
weaker levels.
Gold moves in line with high oil prices as investors hedge against inflation
and counter to the dollar as it is seen as an alternative asset.
"Demand for commodities as inflation hedges resurfaced this week, after
oil's largest weekly gain in more than a year," said Kitco analyst Jon Nadler.
The euro remained firm against the dollar despite the release of a downbeat
lending survey from the European Central Bank, as investors scaled back their
expectations for when interest rates in the 15-nation currency zone will be cut.
"Some weakening in the U.S. dollar and increased investment interest have
been pushing up prices," said John Meyer, Fairfax analyst.
Oil rose to a series of records highs, hitting almost $125 at one point, as
peak prices attracted a rush of fund investment.
At 2:30 p.m., spot gold was trading at $885.33 per ounce against $881.10 in
late New York trade on Thursday having earlier hit $889.53, its highest price
since late April.
While prices were higher today, some analysts reckon gold might be in for
some falls going ahead.
Gold is already some 15 percent lower than the record $1,032.50 it hit mid
March, largely as expectations for the U.S. economy and the dollar appear to
have bottomed out.
Recent dollar strength and rising expectations that the U.S. may hold off
cutting interest rates further, prompted heavy selling in recent weeks.
"Gold prices are nearing the bottom of our forecast range for 2008. The
healthy $130/oz price correction in the past seven weeks looked justified
compared to a less-strong Euro performance since the start of the year," said
ANZ analyst Mark Pervan. "Prices will ease back to $840/oz by September 2008,
with further downward pressure on the Euro and a seasonal slowdown in oil prices
dulling gold's appeal as a financial hedge."
Elsewhere, platinum rose to $2,073 an ounce against $2,019, after hitting a
seven week high of $2,096 earlier -- its highest price since mid March.
Prices were supported on investor demand ahead of the launch of platinum
exchange-traded notes (ETNs).
Investment bank UBS will soon launch two ETNs offering long and short
trading strategies in platinum. ETNs, unlike exchange-traded funds, do not
purchase physical platinum to back the number of shares sold.
"Although this does not impact the underlying physical balance, it does
provide another channel for investment in platinum, giving investors exposure to
the fundamentally strong market," said Barclays analysts.
Among other metals, silver fell to $16.79 an ounce from $16.81. while
palladium was trading flat at $433.
anealla.safdar@thomsonreuters.com
as/ajb
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