Jan 24 (Bloomberg)--Gold topped $900 an ounce in New York for the first time in a week after the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative investment. Platinum futures surged to a record.
European Central Bank officials signaled interest rates would remain steady to cap inflation. The Federal Reserve on Jan. 22 slashed the benchmark U.S. rate by 0.75 percentage point in an emergency move. Gold surged 31 percent last year as reductions in borrowing costs sent the dollar 9.5 percent lower against the euro.
“The biggest factor fueling the rally is going to be continued easing by the Fed while the ECB stands pat,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “The dollar should keep on losing ground against the euro, so we should see another record in gold in the next two weeks, if not sooner.”
Gold futures for February delivery rose $22.70, or 2.6 percent, to $905.80 an ounce on the Comex division of the New York Mercantile Exchange. The price earlier soared as high as $911.10. Gold has gained 8.1 percent this month and reached a record $916.10 on Jan. 15.
Platinum futures for April delivery surged $53.90, or 3.5 percent, to $1,613 an ounce on the Nymex. The price earlier reached $1,617.90, the highest ever. The previous record was $1,597.40 on Jan. 14.
The dollar fell to a record against the euro last year as a housing slump and losses in the subprime mortgage market forced the Fed to reduce borrowing costs 1 percentage point. In 2007, the ECB raised rates 0.5 percentage point to 4 percent.
The euro rose as much as 1 percent to $1.4771 today, and European equities had the biggest gain since 2003 after U.S. stocks rebounded yesterday.
Interest-Rate Futures
Interest-rate futures had indicated a 100 percent chance the Fed will reduce the overnight lending rate to 3 percent from 3.5 percent on Jan. 30. The odds later fell to 66 percent.
“Clear expectations that the Fed will cut once again next week, and cut until some signs of stabilization emerge, continue to fuel the precious metal,” said Jon Nadler, an analyst at Kitco Minerals & Metals Inc. in Montreal.
China reported its economy expanded more than 11 percent for the fourth straight quarter, easing concerns global economies may sag. |
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The UBS Bloomberg Constant Maturity Commodity Index of 26 prices rebounded, led by copper. The measure tumbled 3.5 percent in the previous two days, the most since mid-August.
“The markets sense more stability,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. “The Fed is going to drop rates again, and that's going to hurt the dollar and help gold.”
Jewelry Demand
Still, higher prices may deter jewelers, the biggest buyers of the metal, GFMS Ltd., a London-based researcher, said last week in a report. A slowing economy might also damp demand by shoppers.
Jewelry demand accounted for 62 percent of purchases last year, and that may drop below 50 percent this year, sending the price to $800 by July, GFMS said. Demand from jewelers rose 5.5 percent in 2007 to 2,407 metric tons.
“A recession will hurt fabrication demand but will be more than made up for by investment demand,” said Tom Winmill, president of the Midas Management Corp. in New York.
Investment demand in the StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 653 metric tons on Jan. 14. It rose 39 percent last year. The fund began trading in November 2004.
Platinum Supplies
Platinum jumped partly because of signs that output in South Africa, the world's largest producer, will decline. Platinum and palladium are used to make jewelry and pollution- control devices in cars.
Lonmin Plc, the world's third-biggest platinum company, cut its sales target in the year ending Sept. 30 by 4.4 percent because of accidents and a strike in South Africa. Aquarius Platinum Ltd., which also mines in the country, said production in the second quarter ended Dec. 31 fell 2 percent.
Palladium futures for March delivery climbed $6.60, or 1.8 percent, to $376.05 an ounce on the Nymex. The metal is up 7.7 percent in the past 12 months.
Silver futures for March delivery jumped 36.3 cents, or 2.3 percent, to $16.333 an ounce on the Comex. The price has gained 9.5 percent this month.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: January 24, 2008 14:26 EST |
Prospectus
