US gold futures scaled a record high above $875 in heavy trade on Tuesday, fuelled by robust buying by funds, surging crude oil prices and a drop in the dollar amid a broad commodity rally.
Gold futures should continue to trend higher after breaching the record peak, and a combination of bullish factors should boost the metal above the $900 level in the near term, market watchers said. "It's just a matter of time before gold continues to hit higher. It could break above $900 at the current trend that we are going," said Carlos Sanchez, associate director of research with the CPM Group in New York.
At 10:58 am EST (1558 GMT), the most-active gold contract for February delivery jumped $13.20 or 1.5 percent at $875.20 an ounce on the COMEX metals division of the New York Mercantile Exchange. In overnight sessions, the contract hit a high of $879.40, surpassing the previous record high of $875 for COMEX spot-month futures set January 21, 1980.
The February contract has jumped 5 percent year to date, after posting a 24 percent growth in 2007. Sanchez cited heightened geopolitical tensions in the Middle East, rising energy prices and downward pressure in the dollar. Gold's appeal as a safe-haven investment was boosted due to declining US economic growth and volatile stock markets, he added.
"Volume is really good. I believe this is definitely an inflation play," said Jonathan Jossen, independent COMEX floor trader in New York. Last week, heavy volume of puts were sold and many investors were locking in profits but prices never went down sharply, Jossen said. "If we do dip and if we do have a strong pullback, these guys are going to get right back in because they are making a lot of money," he said.
The psychological mark of $900 will be the next near-term target, after gold futures breached $875 on a spot month basis, Jossen said. However, the gold market could be vulnerable to decline after its recent sharp rally, analysts said.
Meanwhile, broader investment interest in gold remained solid moving into 2008, with gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rising to a record high of 639.35 tonnes by January 7.
Spot bullion was quoted at $872.50/873.20, against Monday's late quote of $859.70/860.40 in New York. London bullion dealers fixed the afternoon spot reference price at $873.50. In other markets, COMEX March silver was up 33.0 cents or 2.2 percent at $15.62 an ounce, trading between $15.255 and $15.680.
Spot silver was at $15.49/15.54 an ounce, compared with New York's late Monday quote of $15.12/15.17. London silver was fixed at $15.485.
Platinum also rebounded, trading near a contract high of $1,562.00 an ounce Friday. April platinum was up $16.00 or 1.1 percent at $1,547.10 an ounce. Spot platinum was quoted at $1,540/$1,544. March palladium eased 30 cents to $376.55 an ounce. Spot palladium fetched $372/$376.
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