Tuesday, September 8, 2009

GOLD SHINES AT 18-MONTH HIGH

       Gold hit US$1,000 an ounce yesterday, a 18-month high, on inflation fears and dollar weakening causing investors to gravitate to safe haven assets, with last year's all-time record of $1,034 appearing within reach this year.Yesterday was the third time bullion has passed $1,000 after peaking this year at $1,005 in February and lifting the bar to $1,034 in March last year.
       Silver climbed to a 13month high as a weaker dollar and concern that inflation may accelerate boosted the appeal of precious metals.
       Bullion for immediate delivery surged to $1,007.70 in London, taking this year's increase to 14 per cent. Gold, which reached a record $1,032.70 in March 2008, is set for a ninth yearly gain.
       Crudeoil futures and all six industrial metals on the London Metal Exchange rallied as the Dollar Index lost as much as 0.8 per cent. Raw materials typically move inversely to the US currency.
       Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies.
       Gold, silver and palladium holdings in exchangetraded funds have advanced to records.
       "We don't see any immediate recovery in the dollar and gold is one of the better alternatives," said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance in Geneva. "From here, the next technical level is $1,040, and at the rate it's going it might not be difficult. There's a lot of new money coming into gold."
       the local market, gold continued soaring with an increase of Bt750 per baht weight over one week after bouncing around in the past few weeks.
       Fundamental factors still support the bullion rally with the US dollar drooping, while technical factors also support gold prices, experts said.
       They predict that if gold can completely break through $1,000 per ounce, the next peak is expected at $1,030. But some believe this rally might be shortlived, as demand for jewellery is not strong.
       Bloomberg quoted UBS AG analyst John Reade as writing in an emailed note yesterday that gold's rally to more than $1,000 an ounce is a "profittaking opportunity rather than a signal to buy". UBS maintained its one and threemonth forecasts for the metal at $950 and $1,000 an ounce respectively.
       Yesterday, the domestic gold price had to be adjusted four times in line with the global market. The last adjustment was made at 2:24pm when gold bullion traded at Bt16,100 per ounce for selling and Bt16,000 for buying, while gold ornaments were pegged at Bt16,500 for selling and Bt15,766.40 for buying.
       The gold price recently has been adjusted several times a day, such as three times on Monday, and two a day from Wednesday to Friday last week. Most of the changes are an increase of Bt50-Bt100.
       Since last Wednesday gold has gained Bt750 per onebaht weight, with a sharp jump on Thursday of Bt350, while the US currency traded in a narrow range of Bt34.02-34.06 from September 1 to yesterday.
       Jitti Tangsithpakdi, president of the Gold Traders Association, said gold had continued rising since last week, because funds were shifted to the gold market for speculation. However the gold price might swing slightly in the next period, the same as equity investment.
       Currently the price of gold bars was at Bt16,100 per baht for selling, which increased from last Tuesday by Bt750 and was the highest in six to seven months.
       Jitti predicts that gold may tag a new high at $1,034 per ounce this year, because the economy has not completely recovered yet. Investors are still not confident in the global economy and allocate money for gold investment, which will push gold prices up.
       Investors should sell half of their gold for profit, while keeping the other half, because the gold price might rise further, he said.
       Kritcharat Hirunyasiri, deputy general-secretary of the Gold Traders Association, said fundamental factors still support the rise in gold prices.
       The US dollar was still weak, while technical factors also supported the gold price as the current gold price stood above the average price in every market.
       Last week gold shot through the $960perounce level and zoomed to $997 per ounce on Friday. The gold price could stay above $990 per ounce, which means that the gold price had turned to an uptrend in the medium and long term, he said.
       The oil price, which generally goes in the opposition direction to gold, fell from $70 per barrel to $67 and US equities were still retreating overall, so funds should give gold a greater weighting. The gold price was supposed to continue increasing at least one week, he said.
       If gold can crack $1,000 per ounce, the next target is expected at $1,030 per ounce.

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