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2nd UPDATE: Spot Gold, Silver Hit Multidecade Highs

2nd UPDATE: Spot Gold, Silver Hit Multidecade Highs
Thursday March 30, 3:51 PM
(Updates with prices, analyst comments.)
By James Attwood
Of DOW JONES NEWSWIRES

SYDNEY (Dow Jones)--The price of gold and silver struck new multi-decade highs in Asian trading hours Thursday as investors covered positions and the U.S. dollar weakened.

Spot silver was trading at $11.24 a troy ounce at 0700 GMT, its highest level in 22 years as investors continued to focus on the implications of Tuesday's partial approval of what would be the first ever silver exchange traded fund.

Further driving sentiment were reports China's Shanghai Gold Exchange hopes to launch the country's first-ever spot silver trading on the bourse in July this year.

Silver's gains, along with short covering ahead of the end of the first quarter and the Japanese fiscal year pushed gold over the $575 level for the first time in a quarter of a century. At 0700 GMT, spot gold was trading around $576/oz.

Other precious metals platinum and palladium also tracked higher, while base metals copper and zinc struck all-time highs on the London Metal Exchange as the U.S. dollar gave ground to the euro and the yen.

At 0740 GMT the euro was trading up 0.3% at US$1.2061, while the U.S. dollar was down 0.1% at Y117.67.

Traders and analysts said gold's rise above its previous 25-year high set in early February opens the door for a run at the psychological $600/oz mark.

Gold's status as a hedge against inflation and U.S. dollar weakness are also being triggered by rising crude oil prices and a retreating dollar as markets reassessed the Federal Reserve's recent interest rate statement.

Japanese investors sent the benchmark Tokyo Commodity Exchange gold contract up Y44 to Y2,200 a gram by Thursday's close.

Several gold equities in Australia, one of the world's largest producers, also rallied Thursday, led by Sino Gold Ltd.'s (SGX.AU) 7% gain and Oxiana Ltd.'s (OXR.AU) 6%.

"Technically, gold's more of a buy now," Darren Heathcote, head of trading at Rothschild Australia said earlier in the session.

"If we break $575, the funds will look to buy more heavily and probably look to push through to $580" in the short term.

Backing up the bullish chart patterns are continuing strong fundamentals for gold, which often acts more as a defacto currency and safe haven than a commodity.

On the inflationary front, oil is climbing closer to the critical $70-a-barrel level while record highs in some industrial metals have the double impact of supporting overall bullish commodity sentiment and spurring inflation.

At the same time, safe haven assets continue to benefit from lingering Middle East geopolitical tensions as Iran defies United Nations appeals to cease its nuclear-development plans and as violence in Iraq continues to escalate.

Concerns the dollar will wilt under the weight of mounting U.S. external debts also support gold's long-term prospects given the metal's four-year uptrend is largely in inverted correlation with the greenback.

In addition, investors continue to target commodities, metals in particular, as a way to diversify their portfolios and spread risk.

"We're in a bull run across the metals - (funds) are in it to win it and it's going up so they're going to buy," said Heathcote.

Although Much Depends On Silver

Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, painted a similarly bullish picture but pointed out gold's recent gains are largely the result of speculators encouraged by silver's rally.

He and other traders said physical gold buying at current levels is extremely thin, which may leave the market prone to downside moves.

Silver has rallied to a series of 22-year highs since Tuesday's partial approval of what would be the first ever silver exchange traded fund, or ETF, being proposed by Barclays Plc., to be backed by physical silver.

Barring a slide in oil prices, a U.S. dollar spike or a bout of silver profit-taking, gold may make a run toward $600/oz as soon as next month, said Dow Jones technical analyst David Rogers.

Commonwealth Bank of Australia commodity strategist David Thurtell forecast Thursday a rise above $650/oz later this year.


LINK: http://sg.biz.yahoo.com/060330/15/3zqiy.html