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Gold Futures Top $900 as Dollar Drops; Platinum Jumps to Record
By Pham-Duy Nguyen
Jan. 25 (Bloomberg) -- Gold surged to a record in New York as higher commodity prices and lower borrowing costs increased the appeal of the precious metal as a hedge against inflation. Silver also gained.
Raw-material costs rose for a second day, led by grains and energy. The U.S. Federal Reserve this week slashed its benchmark lending rate by 0.75 percentage point to 3.5 percent in an emergency move, and government officials worked on a stimulus package to bolster the economy. Gold surged 31 percent last year as consumer prices rose 4.1 percent, the most since 1990.
“This market has proven its mettle,” said William O'Neill, a partner at commodity research firm Logic Advisors in Upper Saddle River, New Jersey. “The stimulus package and lower interest rates are inflationary. Most of the selling this week was margin-related. I see $950 in the not-too-distant future.”
Gold futures for February delivery rose $4.90, or 0.5 percent, to $910.70 an ounce on the Comex division of the New York Mercantile Exchange. The price earlier reached $924.30, the highest ever for a most-active contract. The metal touched $849.50 on Jan. 22, a three-week low.
Silver futures for March delivery advanced 15.7 cents, or 1 percent, to $16.49 an ounce. The price has gained 11 percent this month, while gold rallied 8.7 percent.
Oil Gains
The UBS Bloomberg Constant Maturity Commodity Index rose as much as 1.6 percent after jumping 2.1 percent yesterday. Crude- oil futures rose as much as 2.2 percent today to $91.38 a barrel.
The Jan. 22 rate cut was the biggest single reduction since the Fed began using the benchmark as the principal tool to control monetary policy in 1990. Last year, policy makers reduced the rate 1 percentage point to 4.25 percent as a housing slump and losses in the subprime mortgage crisis threatened to push the U.S. economy into a recession.
Gold is attracting investors seeking a store of value as global equities have tumbled, analysts said. The Standard & Poor's 500 Index is up 1.9 percent this week after dropping 9.7 percent in the first three weeks of this year.
“The fed funds rate is less than the recent inflation rate, meaning that real rates are negative,” said Tom Au, a principal at R.W. Wentworth & Co. in New York.
StreetTracks Grows
The StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, has attracted 8 metric tons of investment this week. Total investment in the so-called ETF reached a record 653 metric tons on Jan. 15. The fund began trading on the New York Stock Exchange in November 2004.
Goldman Sachs Group Inc. forecasts the Fed will reduce rates to 2.5 percent this year and gold will average $870 an ounce.
AngloGold Ashanti Ltd., Gold Fields Ltd., and Anglo Platinum Ltd. closed South African precious-metal mines today because of power outages. Platinum also surged to a record.
“There will be a lot less gold coming out of South Africa,” said Thomas Winmill, president of the Midas Management Corp. in New York. “It's certainly going to increase the costs for South African mining.”
China replaced South Africa as the biggest miner of gold in 2007. Global mine production fell 1.4 percent to 2,444 metric tons last year, according to data from metals researcher GFMS Ltd.
Gold's short-term value may be affected by expectations of another rate cut by the Fed on Jan. 30, analysts said. Interest- rate futures show a 66 percent chance the Fed will reduce borrowing costs to 3 percent by Jan. 30, compared with a 76 percent chance yesterday.
“Another Fed rate cut would certainly move gold higher, but I'm not convinced we'll see that,” said Adrian Day, president of Adrian Day's Asset Management in Annapolis, Maryland. “The 0.75 percentage-point cut was meant to take care of the immediate term.”
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: January 24, 2008 14:26 EST |
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