Gold at 23-yr high in Asia on fund buying Mon Dec 5, 2005 3:18 AM ET By Jae Hur
SINGAPORE (Reuters) - Gold set a fresh 23-year peak in Asia on Monday on fund buying fueled by inflation concerns, upbeat fundamentals and investment funds' strong appetite for commodities, before profit-taking trimmed some early gains.
Despite fears of looming fund liquidation, runaway bullion prices helped boost other precious metals, with platinum hovering above $1,000 an ounce at a near-26-year high while silver hit an 18-year record.
Spot gold briefly hit $508.25/509.00 an ounce before easing to $504.90/505.70 by 0643 GMT, against $503.00/503.80 last quoted in New York on Friday.
Gold, used in jewelry and as an investment, climbed to $509.20 an ounce in February 1983. Anything above that level will bring the metal to its highest since January 1980, when it hit a record $850 an ounce.
"The overall feel in the market at the moment is (of) diversification away from the U.S. dollar and other currencies into gold and also from shares into gold," said a bullion dealer with a major foreign bank in Singapore.
Dealers said the spot bullion market has also been supported by strong buying interest in Japan in recent weeks.
Gold futures on the Tokyo Commodity Exchange rose further on Monday to a 15-year high as the yen's sharp fall to a 32-month low against the dollar supported a buying spree.
The October 2006 contract ended up 15 yen per gram to 1,989 yen after hitting 2,018 yen, the highest level for a benchmark contract since August 1990.
A firmer dollar usually has the effect of raising the value of yen-based commodities prices, but it makes dollar-based gold less attractive to investors with other currencies.
"We've seen gold break the correlation with the dollar in recent times," said Darren Heathcote, head of trading at N M Rothschild in Sydney. "We saw gold strengthening even though the U.S. dollar was strengthening."
"There was a significant drive in Japan in recent weeks. People are very happy to be jumping on the bandwagon and basically riding the thing up," he added.
Japan's economy has outstripped expectations and there would be some fears of inflation coming through, Heathcote said.
"In the currency market ... the fact is inflation is fueled by the weaker yen as far as the Japanese are concerned because they are importing a considerable number of goods," he said.
On the technical side, he said the overwhelming weight of long positions has left gold susceptible to a significant correction at some point.
"If it breaks (below) $500, we will be looking for the strongest support coming around $493.50," Heathcote said.
The Singapore dealer said despite some fears about a massive sell-off due to the large COMEX speculative long position, the overall diversification in the market would help gold prices hold at current levels.
Other precious metals followed gold's lead.
Platinum rose to $994/998 an ounce from $1,000/1,005 late in New York. In early trade, platinum rose to $1,006/1,010, the highest since March 1980.
After trading as high as $270/274, palladium was at $268/272 an ounce, up from $264/268.
Silver rose to $8.61/8.64 an ounce versus $8.54/8.56. In early trader, silver hit $8.64/8.66, the highest since 1987.
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