Gold hits new record above $1,217 an ounce
9:34a ET December 2, 2009 (MarketWatch)
NEW YORK (MarketWatch) -- Gold futures climbed to a new record high above $1,217 an ounce Wednesday, buoyed by strong demand from investors amid worries about the U.S. dollar's continued weakness.
Last month, gold futures posted gains in all but two trading sessions, and they've started December with two days of advances. Meanwhile, holdings for gold exchange-traded funds hit another high.
The December contract rose as high as $1,217.30 an ounce in overnight electronic trading, surpassing the record set in the previous session. It was last up $7.40, or 0.6%, to $1,206.50 an ounce on the Comex division of the New York Mercantile Exchange.
"The continued weakness in the [U.S. dollar] as well as falling U.S. real interest rates have spurred strong investment interest for precious metals over the last few months," said analysts at Credit Suisse in a note to clients Wednesday.
In Comex gold trading, net long positions held by big speculators stood at record highs above 260,000 contracts. Demand for gold ETFs also remained robust, with holdings in all gold ETFs up to 1,770.5 metric tons as of Tuesday, according to data collected by Barclays.
Holdings in SPDR Gold Trust , the biggest gold ETF, rose to 1,130.60 metric tons Tuesday.
Demand for all commodities has been on the rise recently as investors sought hedges against U.S. dollar weakness and inflation
Commodity-sector funds took in more than $1 billion for the second week in a row during the week ended Nov. 25, according to data from EPFR Global.
The inflows fell just short of the previous week's record-setting $1.34 billion. Year to date, flows into this fund group stood at $14.6 billion, EPFR Global said.
"As long as these drivers, i.e., the softer U.S. dollar, lower interest rates, reduced risk aversion and benign equity markets, remain at play, the upward trend in commodities should continue," said analysts at Commerzbank AG in a note.
Gold and the U.S. dollar have had a strong inverse relationship. The precious metal is seen as an investment that can hold its value in contrast to the greenback's continued devaluation.
In currencies trading, the dollar rebounded slightly against some of its major rivals Wednesday. But overall, the greenback still remains weak.
The dollar index , which tracks the greenback's performance against a basket of other major currencies, edged up to 74.399. The index has dropped more than 8% this year.
In Asia Wednesday, investors bet on upbeat prospects for gold miners, fueling a rally among related shares in Australia and China. See story on prospects for Asia's gold-miner stocks.
On Tuesday, gold futures gained 1.5%, as the dollar weakened and Barrick Gold Corp. said it eliminated its gold hedges ahead of schedule and now has full leverage to gold prices.
Gold "is swept along by increasing systemic risk appetite, longer-term inflation concerns and diversification from the dollar, with $1,250 the next likely target," said James Moore, an analyst at TheBullionDesk.com, in a note to clients.
"Barrick's announcement yesterday is an indication of producers' confidence in gold prices going forward and potentially could trigger further sharp price gains in the short term," Moore said.
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