New York (Reuters)--U.S. gold futures set a record high just shy of $900 an ounce on Thursday, as funds poured money after comments by the Federal Reserve Chairman Ben Bernanke prompted speculation of further rate cuts and a dollar slide.
"The rate cut (speculation) has been driving the gold market through its impact on the dollar. I expect more of the same going forward," said Thomas Winmill, portfolio manager of Midas Fund (MIDSX) in New York, which oversees $265 million of assets under management.
The most-active gold contract for February delivery at the COMEX division of the New York Mercantile Exchange GCG8 settled up $11.90 or 1.4 percent at $893.60 an ounce. It traded as low as $867.80 in early sessions on initial profit taking.
Bernanke on Thursday said the U.S. central bank was ready to act aggressively to counter a deep housing slump and credit market strains that were putting economic growth at risk. [ID:nN10198225]
A rate cut lowers the return of treasury bonds and other fixed-income investments, making gold and stocks more attractive.
Shortly after the release of Bernanke's comments, the February contract hit a record peak at $897.30 an ounce, as the dollar slid against major currencies in anticipation of further rate cuts.
"At this particular point, it's all on anticipation of lower U.S. interest rates," said Frank McGhee, head precious metals trader of Integrated Brokerage Services in Chicago.
Bernanke's remarks were in contrast to those of his European Central Bank counterpart, Jean-Claude Trichet. Trichet, citing persistent inflation pressures, indicated further policy-tightening was likely in the euro zone, giving additional impetus to the euro.
"The relevant things today are that the ECB said they are going to be vigilant and tight, and Bernanke said that they are ready to take significant action to support growth and help the economy out," said Axel Merk, portfolio manager of Merk Hard Currency Fund in Palo Alto, California, which manages $250 million of assets.
"I think people are realizing now that we are in a recession, or if we are not in one, we are heading into one. There is very little the Fed can do about it, but there is a lot the Fed wants to do about it," Merk said. |
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FED COULD DISAPPOINT
The failure of the Fed to lower rates to boost growth could disappoint investors and backfire on gold prices, fund managers said.
"It seems like the market is betting that there is a going to be rate cut. I would say that the surprise factor going forward would be that there will be a less-than-expected or no rate cut, and that I think it would be adverse to gold," Winmill said.
In the research sector, Gary Dugan, chief investment officer for Merrill's wealth management arm in Europe, the Middle East and Africa, said that the current gold run, which has seen prices hit a record high near $900 per ounce already this month, is likely to end as the global economy recovers.
"There is an ultimate cap at $1,000," he said, expecting a price of around $740 at the end of the year and $750 as a year average.
Trading was at frantic pace on Thursday. COMEX estimated final gold futures volume at 217,046 contracts, with gold options at 27,077 lots. Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 40,387 lots at 3:21 p.m. EST (2021 GMT) here . At 2:15 p.m., spot gold <XAU=> fetched $889.90/890.60 an ounce, up from Wednesday's New York close of $877.70/878.50. London bullion dealers fixed the afternoon spot reference price at $884.25.
COMEX March silver SIH8 finished up 43.5 cents or 2.8 percent at $16.275 an ounce, trading from $15.415 to $16.355. Spot silver <XAG=> was at $16.12/16.17, up from $15.67/15.72 late Wednesday. London silver was fixed at $15.62. April platinum PLJ8 closed up $3.70 at $1,562.00. Spot platinum <XPT=> was quoted at $1,550/$1,555. March palladium PAH8 eased $1.80 to finish at $380.80 an ounce and spot palladium <XPD=> fetched $373/$376.
(Reporting by Frank Tang, editing by Matthew Lewis) |
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