CNN.com - Gold 14-year high as dollar falls
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LONDON, England -- Gold started the first week of 2004 on a high note in Europe, breaking through a long-standing target of $417.70 an ounce to hit the highest levels since February 1990 as the dollar fell to new lows against the euro and three-year nadirs against the yen.
Analysts said gold could touch $450 an ounce this year, the highest in 16 years, because of ongoing dollar weakness, fears of fresh attacks on the United States and persistent violence in Iraq.
Prices touched a peak of $418.25 in early trading, and analysts said they expected the metal to notch up further gains, given the trends on foreign exchanges and gold's close inverse relationship with the dollar.
"There's a very small amount of profit-taking at the moment. It may fall back to $410 but I believe a rebound to $420 is on the cards," said one dealer in Sydney.
The dollar fell to a three-year low against the yen on Monday, slipping below 106.50 yen as broad dollar selling took it through key technical support.
The U.S. unit was under pressure as comments by Federal Reserve governor Ben Bernanke reinforced a view that U.S. interest rates will stay low for some time. The dollar traded at a low of 106.48 yen, while against the euro it had dropped to 1.2695 on persistent worries about a widening U.S. current account deficit.
"With analysts predicting a test of 1.30 in the euro by the end of the month further gains in gold seem likely," James Moore of TheBullionDesk.com said.
Gold rose about 20 percent in 2003 as geopolitical tension and a sliding dollar raised its safe-haven status. A weaker dollar makes dollar-denominated gold cheaper for holders of other currencies, especially the euro.
Gold, which in early 1990 climbed to $425 an ounce, showed its resilience last month, holding above $400 despite the capture of former Iraqi president Saddam Hussein that lifted the dollar.
"I am not too sure what will happen when the New Yorkers are in. It may test $420. It depends on the euro," said Beh Hsia Wah, a dealer at United Overseas Bank in Singapore.
"Technical resistance at $418 is still holding gold back at the moment and with COMEX traders returning to find the market $3 higher I would imagine we will see some profit taking today, but a break above $418 will see little to slow gold till $422/425," Moore said.
Gold strength
Broker HSBC said that over the last two years it was evident that the dollar/euro rate in particular had provided the dominant influence in gold.
"This has been largely irrespective of developments in the underlying fundamentals of supply and demand, changing producer strategies with respect to hedging, the impact of a higher gold price on mine production plans, the ongoing weakness in physical demand and/or whether or not there will be a renewal of the Central Bank Gold Agreement," HSBC said.
The reference was to an agreement among leading European central banks to limit official gold sales, which expires in September.
"We expect the dollar to continue weakening, with a Q3 target of 1.35 against the euro, implying a gold price of around $435," HSBC added.
At 1118 GMT Monday, gold was quoted at $418.00/418.50 an ounce, compared with London's Friday afternoon fix of $415.25. The New York market was due to reopens later Monday, having closed last Wednesday at $414.80/415.30.
In Tokyo, the benchmark December 2004 contract was 14 yen per gram higher at 1,433 yen.
In other precious metals, spot platinum was quoted at $823/828 an ounce versus the last New York level of $811/816. The metal hit a fresh 23-year peak of $858 on December 18 but has since fallen on profit-taking. Sister metal palladium stood at $195/200, against $191/196.
Silver was quoted at $5.98/6.00 an ounce, versus $5.93/5.95.
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