Gold hit a 28-year high on Thursday after the US dollar tumbled to a record low against main currencies and oil soared to all-time highs, but the rally lost steam just a fingertip away from hitting $800 an ounce.
Spot gold hit a peak of $799.30 an ounce, its highest since January 1980, before dipping to $797.40/798.20 an ounce, still higher than $791.70/792.50 late in New York on Wednesday. The sharp rise in the price of gold, up about 25 percent since the latest rally began in mid-August, has made some investors wary.
"High crude oil prices mean high gold prices, and in addition to this you have the weak dollar which completes the scenario for a Bull Run," said Koji Suzuki, market analyst at Kazaka Commodity Co Ltd.
Gold scored 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. After adjusting for inflation, that level was equal to $2,079 an ounce at 2006 prices, according to metals constancy GFMS Ltd.
The most-active December gold contract on the Comex division of the New York Mercantile Exchange rose $5.0 ounce to $800.3 an ounce on electronic trade. Oil jumped nearly 2 percent to top $96 for the first time on Thursday, after a surprise sharp fall in US crude stocks and data showing strong economic growth.
US crude oil prices rose as high as $96.24 a barrel on electronic trade. Oil price's inflation-adjusted peak is the $101.70 from April 1980. The dollar crawled up against the euro on Thursday but hovered near a record low hit the previous day after the Federal Reserve's expected interest rate cut further eroded the US currency's appeal to foreign investors.
The Fed trimmed rates by 25 basis points to 4.5 percent following up on a half-point cut in September as the central bank tries to limit the broad economic impact of a housing market slump. The euro slipped 0.1 percent from US trade to $1.4465 after having vaulted above $1.45 for the first time in its nearly nine-year life to a record high of $1.4508 on trading platform EBS.
Gold is often bought as a hedge against inflation, while a weaker dollar makes gold, which is denominated in the US currency, cheaper for holders of other currencies.
The benchmark October 2008 gold futures on the Tokyo Commodity Exchange gained 67 yen per gram, or 2.3 percent to finish at 2,983 yen, reflecting gains in New York's Comex market. It rose as high as 2,993 yen, it's highest level since July 1984. The all-time high for a TOCOM benchmark is the 4,326-yen marked in September 1982.
In industry news, Barrack Gold Corp said on Wednesday its third-quarter profit fell 15 percent as lower gold sales and rising costs offset higher gold prices. The world's No 1 gold producer also said it expects gold production of 8.1 million ounces for the year, at the low end of its previous forecasts.
Silver edged up to $14.49/14.54 an ounce edging up from $14.47/14.52 late in New York. Platinum rose to $1,452/1,457 an ounce from $1,441/1,445 late in New York. Palladium inched higher to $371/375 an ounce versus $369/373.
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