Gold traded just below a new 18-year high hit earlier on Friday after aggressive buying by investment funds, and analysts said the metal had potential to target news highs again.
Gold spiked to $488.70, its highest since January 1988, despite dollar strength that makes bullion more expensive for holders of other currencies. It even managed to set highs in euro and sterling terms.
"The way the funds have been trading in the market, any short-term correction lower will be very aggressively bought," said Alan Williamson, analyst at HSBC Bank.
He said the rally was purely speculative and the clear target was $500.
Analysts said speculators had been showing keen interest in commodities amid worries about the impact of high crude oil prices, inflation, the US economy and geopolitics.
Gold has gained 14 percent since the beginning of 2005 and has nearly doubled since touching lows of $254 in 2001. Spot was at $485.40/486.20 by midafternoon in New York, vs. $485.90/486.60 last quoted in New York on Thursday.
"Gold is going to (hit) $500 by Christmas and everything that happens is a step in that direction," said Peter Hillyard, head of metals sales, Europe, at ANZ Investment Bank.
"The funds want to diversify portfolios and they are buying commodities because they are seen as being potential for better returns," he said.
Benchmark December futures closed down 70 cents at $486.20 an ounce on the New York Mercantile Exchange, after hitting an 18-year high at $489.60 in off-hours ACCESS electronic trading.
Thursday's report on demand by the industry-backed World Gold Council also lifted sentiment. It said global gold demand in the third quarter of 2005 rose by 7 percent to 838 tonnes from the year-ago quarter.
"Certainly fund buying tends to be short-lived without a strong fundamental backdrop," said Mark Keenan, fund manager at UK-based MPC Commodity Fund.
"It certainly looks like there is a quite big convergence of supportive fundamental factors at the moment. If the outlook is bullish, then it's prudent for hedge funds to continue buying."
Gold scaled a new record high in euro terms XAUEUR=R at 418.17 euros and also surged to 285.20 pounds an ounce, the highest in sterling terms XAUGBP=R in nearly two decades.
Silver traded below an 11-month peak of $8.15 an ounce, a break of which would take the price to its highest in about 19 months.
Spot was quoted at $8.10/8.12 an ounce, up from $8.07/8.09 last quoted in the US market.
Platinum touched $982.01 before moving to $976/980, unchanged from $976/980 late in New York but off a near 26-year high of $992 on Thursday. But dealers said active buying by funds could soon push up the metal to $1,000, which was last seen in March 1980.
Palladium was quoted at $259/263 an ounce, the highest in 18 months. It closed in New York at $256/260.
Comments
Comments are closed.