$900 Soon?

January 10, 2008

Gold gained in choppy trade today as a weaker dollar and bargain hunting lifted the metal closer to record highs. Gold now sits right at $890 or $10 away from another psychological level. And then it’s $1,000? When? Who knows, but for thos of us who bought in a few years ago at $275, this sure feels good!

Spot gold fell early, but recovered to $889.30. It hit a record high of $891.40 at one point yesterday! “It’s partly dollar-related. Buying also came in when we moved below $880 as some people considered that level is a good opportunity,” said Frederic Panizzutti, analyst at MKS Finance.

“It looks that the $900 level is very close now and might be an imminent target in the next couple of days. There are many supportive factors. The dollar is weak and we have the beginning-of-the-year asset reallocation.” The euro climbed against the dollar after European Central Bank President Jean Claude-Trichet flagged more interest rate increases in the euro zone, citing lingering inflation pressures.

Gold, which gained more than 30% last year, entered the new year on a firm note, rising 6% on speculative buying ignited by a struggling dollar and record high crude oil prices. “Gold prices appear to be largely taking their direction from dollar movements and investment demand is likely to continue to underpin prices,” Suki Cooper, precious metals analyst at Barclays Capital, said.

“Safe-haven buying, triggered by inflationary concerns, geopolitical tensions and broader market concerns, has the potential to buoy prices further in the forthcoming weeks,” she said, but said the metal might consolidate in the near term. Recent grim US manufacturing and employment data has intensified the likelihood the US Federal Reserve will cut interest rates by half a percentage point later this month.

Written by Ernie · Filed Under Gold News