Gold Passes $900 on Dollar Weakness

Gold surged to a record above $900 an ounce on Monday as expectations of aggressive interest rate cuts pushed the dollar lower., Financial Times 1/14/2008 6:32:06 AM

By mid morning in London, spot gold hit a record $914 a troy ounce, up 1.8 per cent from Friday’s close.

Gold’s latest rise was driven by fresh weakness in the dollar. Metals, which are priced in dollars, become cheaper to buy in other currencies as the US unit slides. The dollar fell 0.6 per cent against the euro and by 1 per cent against the yen in early London trade.

The safe haven appeal of precious metals was boosted by fears of more shocks in financial markets with further large losses related to sub-prime lending expected from a number of major US financial institutions which report fourth quarter results this week.

However, high gold prices have had a damaging effect on physical buying by jewellery makers, but the latest data from the Commodity Futures Trading Commission showed that speculators have continued to increase their bets that bullion will rise further.

The latest CFTC data showed that the speculative net long position rose 3 per cent to 205,404 lots, a record, but this is raising concerns that gold could be vulnerable to profit taking.

Platinum rose up 1 per cent to a new record at $1,587 a troy ounce, while silver hit a 27-year high, up 2 per cent to $16.58.

In energy markets, oil prices edged higher, finding support from dollar weakness and concerns about supplies from Nigeria following further violence. Militants in Nigeria attacked an oil tanker on Friday using a remote controlled bomb. This second attack by militants in a week has raised concerns about the risks for further disruptions to supplies from the world’s eight largest exporter.

Nymex February West Texas Intermediate rose 41 cents to $93.10 a barrel while ICE February Brent addded 54 cents at $91.61 a barrel.