Gold prices jumped to two-week highs on Monday as investors sought refuge from financial market uncertainty, the dollar slipped and oil prices held firm near record highs. Platinum hit a record high of $1,486 an ounce on worries about falling supplies from South Africa after the country's biggest union said last week it was planning a strike against the mounting number of mine deaths.
Spot gold hit $836.70 a troy ounce, the highest since November 9 and was up at $829.40/830.10 by 1511 GMT, compared with $821.20/821.90 late in New York on Friday. Earlier this month it hit a 28-year high of $845.40. The dollar was within striking distance of record lows against the euro as investors sold on concern about the health of the US economy and expectations of further rate cuts from the US Federal Reserve.
"The dollar is weak and that means there is a general uplift for metals," said Dan Smith, analyst at Standard Chartered. "It's also a safe haven in terms of the credit crisis." A falling US currency makes dollar-denominated metals cheaper for holders of other currencies, while gold is seen as a hedge against financial market turmoil and inflation, which is often sparked by rising oil prices. Crude oil was trading above $97 a barrel, within sight of the all-time high of $99.29 hit last week.
"We did see a small sell-off on lower oil prices earlier today," a London-based trader said. "But it doesn't mean anything ... Oil prices are still near record highs and the dollar is at record lows."
Traders expect gold prices to stay at current levels and possibly test the record high of $850 an ounce set in January 1980, but they think another downturn in equity markets could see gold prices fall. Over the course of this year, many investors have sold gold to cover stock market losses, while others have cut their holdings of the precious metal alongside other investments to take their portfolios back to neutral.
But for now, gold markets around the world are taking their cue from the dollar and oil prices, as can be seen in the rising value of gold in other currencies such as the euro and Australian dollars. "Strong buying has been seen this morning ... as dollar weakness and high oil prices again prove supporting for the precious metals," TheBullionDesk.com said in a note.
"Given the oil/dollar scenario, and the likelihood for further credit-related fallout, the outlook for gold still remains bullish, with $850 still the clear target." Platinum was at $1,476/1,481 an ounce from $1,468/1,473 on Friday.
Traders said news of another fatal accident at South Africa's Aquarius Platinum could make union workers more determined to strike until safety measures were improved.
Palladium was at $354/358 an ounce from $353/357 and silver was at $14.79/14.84 from $14.71/14.76 on Friday. Earlier in the session, silver tracking gold hit $15 an ounce, the highest since November 15, but traders said the metal used in many industrial applications could come under selling pressure as economic growth slows.
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