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| Gold at record highs |
| Halia Pavliva & Claudia Carpenter / Sep 14, 2009, 00:25 IST |
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Dollar weakness and higher inflation fears are pushing the yellow metal higher
Gold surged to the highest price since March 2008 and a record close as the dollar extended its longest slide in six months, boosting demand for the metal as a hedge against inflation.
The US Dollar Index has dropped for six consecutive sessions, the longest slump since March, to an 11-month low. Before declining today, crude-oil prices, used by some investors as a gauge of future inflation, jumped 61 per cent this year. Gold, which tends to gain when the dollar weakens, has climbed 14 per cent in 2009.
“The dollar is going down because of inflation fears” and that pushes gold up, said Leonard Kaplan, the president of Prospector Asset Management and a bullion trader for more than three decades. “There is too much money and everything is going up. It’s not about supply and demand, it’s not about common sense.”
Gold futures for December delivery rose $9.60, or 1 per cent, to $1,006.40 an ounce on the New York Mercantile Exchange’s Comex division, the highest closing price on record and the first above $1,000 since February. The advance brought this week’s gain to 1 per cent. Gold has climbed for four straight weeks.
“The continued weakness in the dollar gave the bulls incentive to push this higher,” Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York said.
Dollar slump
The dollar index, which fell 2.1 per cent in the previous five sessions, dropped 5.5 per cent this year. Gold’s gains were “strictly a dollar-inverse play,” said Jon Nadler, a Kitco Inc. senior analyst in Montreal. While the market is “overbought,” he said “speculators keep pushing.”
In London, bullion for immediate delivery rose $8, or 0.8 percent, to $1,004.60 an ounce. The spot price is up 14 percent for the year. Gold’s gains may continue, “given concerns over rising inflation and our expectations for the dollar to weaken further,” Suki Cooper, an analyst at Barclays Capital in London, wrote in a report.
Demand for gold through exchange-traded funds will rise to 700 metric tons this year, from 322 tons last year, Barclays said in the report. Gold assets in ETF Securities’ exchange-traded commodities rose to a record, reaching almost 8.2 million ounces yesterday from 8.1 million on September 9, the company said on its Web site.
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