Gold rose back above $1,000 per ounce on Wednesday as the dollar extended losses against the euro, and amid concern about the sustainability of this year's rally in equities and some key commodities. An announcement by the world's largest gold miner, Barrick Gold, that it plans to eliminate its forward gold sales also propped up prices, analysts said.
Spot gold was $1,000.20 an ounce at 1447 GMT compared with $995.20 late in New York on Tuesday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $2.20 to $1,002.00. Platinum also climbed to a 12-month high of $1,295 an ounce in early trade, boosted by the surge in gold prices. It was later at $1,284 an ounce against $1,283.
"There is strong investment interest at the moment, and the media interest after gold broke through $1,000 an ounce is also increasing interest on the speculative side," said Commerzbank analyst Eugen Weinberg. He said news of Barrick's dehedging activity was also supporting gold prices. Gold broke through the $1,000 mark for the first time since February on Tuesday and rallied to an 18-month high, boosted by technical buying momentum and a sharp slide in the dollar.
The precious metal touched a record $1,030.80 an ounce in March 2008. Analysts say that if prices manage to consolidate around $1,000 an ounce, rising risk aversion and dollar weakness could push them back towards this high. The dollar index fell 0.63 percent on Wednesday, extending the previous session's sharp fall to near year lows, supporting gold at higher levels. The euro rose to $1.46 against the dollar amid a broad-based sell-off of the currency.
"Clearly part of this is concern about further weakness in the dollar," said Daniel Smith, an analyst at Standard Chartered. "People are piling into gold in all sorts of different ways, both consumers and investors." He said a more cautious tone to the wider markets, after a rally in asset prices over the summer months, and expectations China may move to diversify its foreign exchange holdings away from the dollar were also lending support to the precious metal.
Barrick Gold said it planned to eliminate its outstanding fixed-price gold hedges and a proportion of its floating hedges. Miners have hedged by selling forward their unmined production as a means to lock in prices. But as prices have risen in recent years, they have tended to de-hedge, or cut back their hedged positions, to take advantage of price gains.
Among other precious metals, silver was at $16.57 an ounce against $16.41. Silver, which like copper or nickel is a largely industrial metal as well as an investment product, came under pressure from losses in the base metals early Wednesday. Palladium was at $292.50 against $294, with prices suffering from their proximity to the key $300 an ounce mark, which has prompted some investors to take profits after the metal's 1 percent rise in Tuesday.