Traders see new highs for yellow metal

Spot gold closed at Rs 10,050 per 10 gm tracking Asian prices, which were up due to high investment demand from hedge funds and pension funds. Traders in Mumbai expect pure gold (.999 purity) to touch Rs 12,000 per 10 gm and standard gold Rs 11,700 per 10 gm.

Prices have opened at a new high up for the second consecutive week.

Overseas the yellow metal scaled a new 25-year high on Monday supported by a weak dollar and active buying by Japanese investors returning after a holiday, but failed to retain gains in later business hours.

Some participants quit the market to pocket profits but overall positive sentiment was seen lifting the metal to the next big target of $700 an ounce after a brief period of consolidation, dealers said. "After a series of six positive sessions, some consolidation might be expected, but buying on dips remains a feature of the market and should continue to provide some support below," Julia Hamblett, V-P at Dresdner Kleinwort Wasserstein, said.

Gold rose as high as $684.70 an ounce before falling to $676.80-677.80 by 1230 GMT, against $682.10"�683.10 late in New York on Friday.

Pierre Lassonde, chairman of the World Gold Council, said last week he saw gold at $850 over the next 18 months.

The metal has gained 32 per cent this year due to tension in West Asia, firm oil prices and a volatile dollar. The price has doubled in three years.

The dollar remained under pressure across the board, hitting fresh one-year lows against the euro and sterling and a near eight-month low against the yen.

A weak US currency makes dollar-priced gold cheaper for holders of other currencies. Some investors also switch from the currency market to commodities to chase high returns.

"The market sentiment is cautiously optimistic still. Most people are expecting gold to trade higher, particularly as the dollar seems to be unstoppably weak at the moment," John Reade, precious metals analyst at UBS Investment Bank, said.

"I would suggest scaling back long positions in both gold and silver. Take some profits here and hope for better buying opportunities after a correction."

Tokyo gold futures surged to their highest since September 1985. Most-active futures rose by 57 yen to 2,491 yen a gram as sharp gains in New York futures ignited active buying by Japanese funds and retail investors.

"Although the market sentiment towards the metal remains upbeat, gold will be vulnerable to short-term corrections," said NM Rothschild in a report.

In other precious metals, platinum surged to a record high of $1,189-1,193 an ounce before easing to $1,182"�1,187, against $1,178-1,183 in New York. Palladium rose as high as $377 an ounce before dropping to $373-378, compared with $370"�375 in the US market.

Silver fell to $13.53-13.63 from $13.91"�14.01 in New York and a 23-year peak of $14.68 on April 20.

"I will rule out the downside. It's a matter of time before the next wave of buying will come around. ETF is a dominant factor," said a dealer in Singapore, referring to an exchange-traded (ETF) silver fund that was launched in the US two weeks ago.