Gold prices soared to their highest level in close to 23 years in New York on Thursday, powered by more investment fund buying after the breakout above the key $500 an ounce mark this week, dealers said.
The market's sharp gains also boosted other precious metals prices, pushing silver to an 18-year high and sparking buying in platinum and palladium as well.
At the Comex division of the New York Mercantile Exchange, February delivery gold settled up $7.60 at $506.30 an ounce, just below a session high at $506.80, which marked the priciest for a benchmark futures contract since February 1983.
At that time, gold peaked at around $514 an ounce. "Gold is robust, silver is acting very well; all the industrial markets are firm it's a broad based commodity rally today," said James Quinn, commodity commentator for AG Edwards & Sons.
Gold's fundaments have been positive and investors were diversifying their portfolios, as currencies were not offering strong returns, analysts said.
Inflation worries also persisted given firm oil prices. Spot gold surged to a near-23-year high at $503 an ounce in New York.
It last fetched $503.00/503.75, against on Wednesday's close at $494.10/494.90.
On Thursday's afternoon fix in London had reached $499.75. Market watchers said that both physical and investment demand for gold are strong while supply is reasonably tight, and the metal is garnering increased respect as an asset class and as a currency proxy.
"What is different perhaps now from the last time gold was above the $500 mark is that you probably have less supply issues going forward (now)," said Mark Johnson, portfolio manager of USAA Precious Metals and Minerals Fund. "Most of the mining companies don't really have that much on the plate in terms of new production and most of what is coming on stream is replacing mines that are shutting," he added.
"Mine supply should stay tight." The latest peak in Comex February surpassed the 18-year peak hit on Tuesday in then-benchmark December gold at $502.30.
"The $500 level was a psychological point and we broke through that," said Emanuel Blear, senior market strategist at Wisdom Financial Inc.
"With gold still rising today, I think we are going to crack $600 sometime in 2006." Baler felt that one reason gold had room to rise further was that bullion's high of $850, touched in 1980, after being adjusted for inflation today, would be now worth around $2,150 in current dollars.
"Gold is still very cheap when you look at it in that perspective," he said.
Dealers said the market was awaiting the US November unemployment report on Friday for a potential reaction in trading. Separately, brokerage firm UBS said it raised its average per-ounce gold price forecast for 2005 to $441 from $434, for 2006 to $520 from $455, and for 2007 to $500 from $435.
The CBOE Gold Index, comprised of the US shares of some of the top US, Canadian and South African gold miners, was up 3.8 percent on Thursday afternoon.
Final estimated Comex gold volume was 60,000 lots, above on Wednesday's tally of 57,103 lots. Open interest fell 7,715 contracts to stand at 342,510 lots.
March silver futures jumped 21.7 cents to $8.602 an ounce, after dealing from $8.29 to $8.62 the highest for futures since August 1987. A move above $8.90 would take silver to its loftiest since May of that year, when it hit $9.50.
Spot silver last fetched $8.51/53 an ounce, from $8.27/29 previously. The fix was at $8.315. Nymex January platinum gained $14.30 to finish at $994.70 an ounce.
On Monday, futures shot up to $1,011 their highest price since March 1980. Spot platinum firmed to $987/992. March palladium rose $8.40 to $268.40 an ounce.
The session peak of $273 was a 19-month high. Spot palladium was worth $261/264.