From: Biniam Tekle (biniamt@dehai.org)
Date: Wed Oct 07 2009 - 07:48:18 EDT
Gold Hits Record as Dollar Falters
By REUTERS
Published: October 7, 2009
Filed at 6:11 a.m. ET
Skip to next paragraph LONDON (Reuters) - Gold powered to a record high on
Wednesday, topping the previous day's gains, as dollar weakness and mounting
worries about potential inflation enticed more investors to the precious
metal.
Spot gold hit a historic $1,048.20 an ounce and was at $1,046.60 an ounce by
11:03 a.m. British time, versus $1,040.85 quoted late in New York on
Tuesday. U.S. December gold futures hit a new peak of $1,049.70 an ounce.
Other precious metals benefited from bullion's rally with palladium hitting
$313.50 an ounce, its highest since August 2008 while palladium rose to a
two-week high and silver climbed to a three-week high.
"The demand is coming almost exclusively from the investment side," said
Eugen Weinberg, analyst at Commerzbank. "Gold reaching an all-time high is
attracting new investment. his momentum can take us to even $1,100 an
ounce," he said.
"As long as we don't see a sustainable rally in the dollar, I don't think it
(the rise) will stop," Weinberg said.
The dollar extended loses against commodity currencies, hitting the lowest
in a year or more against Canadian, New Zealand, and Australian dollars.
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Bullion has gained nearly 20 percent this year, helped by dollar weakness
and on the back of escalating inflation worries after the central banks and
governments across the globe poured billions of dollars into the financial
system to revive growth.
However, current prices are still sharply below the inflation adjusted
record pinpointed by analysts. Metals consultancy GFMS put that figure as
high as $2,079 an ounce.
WEAKER PHYSICAL DEMAND?
Gold's rally has boosted flows into exchange traded funds (ETF). The world's
largest gold-backed ETF, the SPDR Gold Trust, said its holdings stood at
1,100.514 tonnes as of October 6, up 0.2 percent or 2.441 tonnes from the
previous business day for the third consecutive day of increase.
"The surge in demand for gold does not appear to be short term in nature as
we have been seeing very rapid growth of investor holdings of gold through
our ETCs for over a year now," said Nicholas Brooks, Head of Research and
Investment Strategy at ETF Securities.
ETF Securities' said its total gold holdings now stand at 8.3 million
ounces, up 110 percent over the past two years.
However, the high prices are set to curb demand for physical gold, traders
say, potentially weakening the fundamental case for gold's sustainable
rally.
"The ETFs are attracting some inflows but those by no means can compensate
for the falling physical demand from the jewellery side," Weinberg said. "In
India, I think despite the festive season there, demand will be very weak
given current prices," he said.
Among other precious metals, silver rose to $17.49 an ounce, its highest
since September 17, and was last at $17.43 an ounce versus $17.32 an ounce
last quoted in New York on Tuesday.
Platinum climbed to $1,338 an ounce, its highest since September 23 and was
last at $1,332 an ounce from $1,313.50 an ounce.
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