Gold hits record above US$1,167/oz as dollar slips

Gold hit a record high at $1,167.35 an ounce on Monday as dollar weakness pushed the metal through key technical resistance levels, fuelling momentum buying after the metal’s sharp run higher earlier this month.

Spot gold was bid at $1,165.55 an ounce, against $1,148.20 late in New York on Friday. U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $19.20 to $1,166.00 an ounce.

Afshin Nabavi, head of trading at MKS Finance in Geneva, said the metal’s rise through technical stops had triggered fresh buying.

“The way the market held the $1,130 support on Thursday and Friday was very impressive,” he said. “It looks like $1,200 will be seen much sooner than expected.”

The dollar extended broad losses on Monday, hitting a six-week low versus the yen after comments from a Federal Reserve official bolstered the view that U.S. interest rates will stay low.

Weakness in the U.S. unit boosts gold’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Oil prices rose more than 1 percent, meanwhile, to top $78 a barrel, after the U.S. dollar lost its footing and heightened tensions between key oil exporter Iran and Western nations raised speculation of a potential supply threat.

Strong oil prices raise the metal’s safe-haven appeal against inflation. For a graphic on gold, oil and dollar’s performance, click on the link:

Technical analysts at Barclays Capital — who study past price charts to determine trends in future trade — said in a note that gold was poised for further gains.

“Gold has entered a seasonally bullish period and is also performing well when priced in the other major currencies,” the note said.

“Such a backdrop suggests higher prices into year-end,” it added.

Cenbanks fuel investment

Investment buying has also been encouraged by a spate of acquisitions of gold by central banks, most notably that of India, which bought 200 tonnes of the precious metal from the International Monetary Fund

“You’ve got more high-profile hedge funds visibly investing in gold. That’s yet another factor encouraging moves into gold by the wider investor community,” said David Barclay, commodity strategist at Standard Chartered in Hong Kong.

Option traders are betting gold will hit $1,200 an ounce or higher by early next year, and strong options interest could in turn lift underlying prices further into uncharted territory.

On the physical side of the market, dealers in Asia noted buy-backs and limited sales of scrap from jewelers due to expectations that gold prices could rise further.

Nabavi said some light physical demand had been seen out of Asia overnight.

Gold’s gain lifted other precious metals, with platinum hitting its highest since September 2008 at $1,467.

Spot platinum was at $1,466 an ounce against $1,441, while palladium was at $366.50 against $361. Spot silver was bid at $18.78 an ounce against $18.46. (Reuters)

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