Friday January 11, 01:39 PM
Metals - Gold steadies around 890 usd mark following fresh record high
LONDON (Thomson Financial) - Gold prices steadied around the 890 usd mark after rising to a fresh all-time high overnight, boosted by heightened expectations for aggressive rate cuts in the US to help counter a possible recession in the world's largest economy.
Platinum and silver have also set new records, with the former hitting an all-time high of 1,564.50 usd, while silver hit a 27-year peak of 16.28 usd this morning.
At 1.16 pm, spot gold was trading at 891.95 usd per ounce against 891.70 usd in late New York trade yesterday, easing on profit-taking after touching 897.50 usd late last night. The metal has risen as high as 897.10 usd this morning, before running into resistance ahead of the key 900 usd mark.
Gold prices bounced yesterday after comments from US Federal Reserve Chairman Ben Bernanke pointed to a possible 50 basis point cut in interest rates on Jan 31. With the European Central Bank and the Bank of England both holding interest rates steady, the dollar weakened sharply in response, boosting gold which acts as an alternative investment to the most common form of currency reserves.
'Since the economic picture can be expected to grow increasingly gloomy, the markets are expecting the Fed to cut interest rates a number of times in the next few months, which could keep the real interest rate for US investments below zero for the duration,' said analyst Eugen Weinberg at Commerzbank (Xetra: 803200 - news) .
Gold has risen by well over 200 usd since the onset of the credit crunch in mid-August last year, as a series of factors have collided to propel the precious metal to new levels, including dollar weakness, rising inflation and the recent economic turmoil.
The majority of investment banks have been upgrading their 2008 gold price forecasts as a result of the recent moves, with Goldman Sachs (NYSE: GS - news) boosting its average price outlook today.
'Our long-held view that gold trades first and foremost with the US dollar due to its currency-like properties of being a store of value and a medium of exchange remains intact. Accordingly, this week's downgrade of the US dollar outlook made by the Goldman Sachs currency economists is leading us to increase our gold price forecasts to 900 usd per ounce in six months and 800 usd per ounce in 12 months, from 785 usd and 750 usd previously.'
Given gold's recent strength, and the supportive fundamental environment, few investors are betting against gold hitting 900 usd in the short-term, with some market players already talking about the 1,000 usd mark.
'The scale of buying interest that continues to flow into the market, and the fact that dips remain extremely short-lived again suggests gold has plenty of upside work still to do,' said TheBulliondesk.com analyst James Moore. '900 usd remains the near-term target, however there is little to suggest gold's charge will halt once it gets there.'
Downside risks are posed by a possible rebound in the US dollar, should the ECB eventually have to cut interest rates to help combat a possible global economic downturn. The number of smaller recent investors into gold, helped by exchange traded funds (ETFs) which buy physical gold and then allow individuals to buy exposure to the precious metal without expending large amounts of capital, could also pose a risk, analysts said.
Among other metals, platinum was trading at 1,555 usd per ounce against 1,552 usd in late New York trade last night. Sister metal palladium was more subdued, trading at 372 usd per ounce against 375.50 usd.
Finally, silver consolidated after its earlier highs, trading at 16.09 usd per ounce against 16.20 usd.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View