Gold hits 11-month high on dealer, fund buying
Mon Apr 16, 2007 4:24pm ET16
By Frank Tang and Atul Prakash
NEW YORK/LONDON, April 16 (Reuters) - Buying by dealers and funds and a lower dollar sent gold to an 11-month high in New York afternoon trade on Monday, but dealings were choppy as prices approached the psychological threshold of $700 an ounce.
The platinum group metals also strengthened in the early session, with palladium and platinum hitting 11-month and five-month peaks on the news of a new exchange-traded fund. Profit taking, however, knocked prices lower by afternoon.
Spot gold <XAU=> jumped to $691.00 an ounce, surpassing the 2007 peak of $689 which was set on Feb. 26, before the tumultuous sell-off in the global financial markets.
It was quoted at $690.60/691.10 by 3:59 p.m. EDT (1959 GMT), compared with a late quote of $684.30/$684.80 in New York on Friday.
Most-active gold futures for June delivery <GCM7> on the COMEX division of the New York Mercantile Exchange settled up $4.60 at $694.50 an ounce, traded in a range from $687.40 to $695.00.
Bill O'Neil at LOGIC advisors said that dealer and fund buying as well as a weak dollar helped reverse earlier losses due to hedge selling and sales by European dealers.
"The market's a little nervous as it gets closer to the $700 level," O'Neill said.
He said that gold was able to maintain its gains and developed into a nice, orderly pattern, which was constructive for the market, as opposed to a big rally followed by a huge drop in prices.
Spot gold <XAU=> hit a 26-year high of $730 in May 2006.
"I think those levels (record high) will be challenged at some point this year," O'Neill said.
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The metals were helped by a higher euro, which hit a two-year high around $1.3576 <EUR=>, setting it on a path towards the all-time high of $1.3670 struck in December 2004.
A lower dollar makes gold cheaper for investors holding other currencies.
U.S. crude futures <CLc1> ended down 2 cents at $63.61 a barrel, but up from early losses. Gold is generally seen as a hedge against oil-led inflation.
"The factors which have been in play recently are still there. Oil is still strong, the dollar is taking a beating and the base metals complex, by and large, is strong again today," said Tom Kendall, precious metals strategist at Mitsubishi.
"For platinum and palladium, in particular, the ETF story is helping things along."
Platinum <XPT=> touched $1,284 an ounce, the highest since late November, and was quoted at $1,271/1,276, lower than $1,272.00/$1,277.00 late in New York on Friday.
Palladium <XPD=> rose as high as $378 an ounce and was last quoted at $372/377 an ounce, compared with its previous close of $375/380 in New York.
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Switzerland's Zurich Cantonal Bank said it planned to launch exchange-traded funds (ETFs) based on platinum, palladium and silver from the next month. [ID:nL1623759]
"This launch, should it attract large-scale inflows, would have a material impact on the platinum market, and possibly on the palladium market," said John Reade, head of metals strategy at UBS Investment Bank.
ETFs allow investors to gain exposure to commodity markets without worrying about setting up futures trading accounts or taking physical delivery. Sponsors of such funds buy a matching amount of the commodity from the market to keep in bank vaults.
Silver <XAG=> rose as high as $14.11 an ounce before slipping to $14.03/14.06, compared with $14.04/$14.09 in the U.S. market late on Friday.
First Dutch Gold Dore Bar
