7pmNov18: Gold Futures Rise Above $400 for First Time in Seven Years
Nov. 19 (Bloomberg) --
(Chi2 comment: Last Updated: November 18, 2003 21:46 EST )
Gold rose above $400 an ounce for the first time in more than seven years after the dollar fell to a record low against the euro, making bullion priced in the U.S. currency cheaper for buyers in Europe.
Gold for December delivery rose as much as $3.10, or 0.8 percent, to $400.70 an ounce, its highest since April 1996, in electronic trading on the Comex division of the New York Mercantile Exchange. It lost ground to trade at $399.30 at 1:24 p.m. Sydney time.
``We're looking at what could be significantly higher gold prices over the long term,' said Frank McGhee, head trader at Alliance Financial LLC in Chicago. ``Gold could easily spike up another $20 or $30' in the next week to 10 days on speculation of further declines in the dollar against the euro.
Higher gold prices may boost revenue of producers such as Newmont Mining Corp., the world's biggest producer of the metal, and Japan's Sumitomo Metal Mining Co.
Newmont's shares traded in Australia rose 2.5 percent to A$6.23 at 2 p.m. Sydney time, bringing gains to 41 percent in the past six months. Sumitomo Metal Mining Co. shares rose 1.8 percent to 688 yen, taking its gains to 70 percent since May 19.
This year's 15 percent rally in gold futures has been fueled partly as the dollar slumped against all of the 16 most-traded currencies except the Mexican peso. The dollar slid 12 percent against the euro and 23 percent against the South African rand.
The dollar touched a record low against the euro in Asian trading after net foreign purchases of U.S. securities in September fell to the lowest in five years, a government report showed yesterday. Gold futures have gained almost half during the past two years.
`Dollar Weakness'
``We've been saying for a little while now that it wouldn't surprise us to see the gold price go through $400 because it is driven by dollar weakness,' Jonathan Best, finance director of AngloGold Ltd., the world's second-biggest gold producer, said in an interview yesterday. ``Four hundred dollars is a psychological point for the gold price.'
Gold for immediate delivery rose as much as $3.42, or 1.2 percent, to $400.55, from $397.13 at 1:30 p.m. in New York yesterday. Spot gold traded at $399.15 at 1:24 p.m. Sydney time.
The dollar fell as much as 0.1 percent to $1.1978 against the euro, from $1.1973 in late New York trading yesterday. It traded at $1.1960 at 1:43 p.m. Sydney time.
Gold futures have risen from $257.30 on Aug. 31, 1999, the lowest price in the past two decades, amid falling output and as mining companies reduced sales of metal for future delivery. The price has also gained as central banks slowed sales of gold reserves and terrorist attacks in the U.S., the Middle East and Asia raised demand from investors seeking a haven.
The increase in gold prices ``may encourage investment in mines and new production,' said Doug Buerger, chief executive and managing director of Australia's Bendigo Mining NL, which is considering developing a mine under the town of Bendigo, north of Melbourne. ``More and more we're getting views from fund managers out there that they need to get gold into their portfolio' either in the form of bullion or equities, he said.
Last Updated: November 18, 2003 21:46 EST
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