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Gold scales 28-yr high, platinum sets record

LONDON - A weak dollar, near record-high oil prices and simmering geo-political tensions sent gold to a 28-year high of $770 per ounce on Friday, while continued supply worries gave platinum fresh legs, helping it to record highs.

The dollar fell to a record low against the euro and a multi-decade trough versus a basket of currencies on a growing view that another US rate cut could be on the cards.

Dollar weakness makes gold cheaper for non-US investors and a rate cut also reduces the US currency’s yield appeal.

“Gold is still largely a dollar story. There’s a perception in the market that the dollar is going lower, and people are buying into that,” said Stephen Briggs, economist at SG Corporate and Investment Banking.

Spot gold hit a high of $770 an ounce, its highest since January 1980, before paring gains to $764.50/765.00 by 1354 GMT, against $763.90/764.70 late in New York on Thursday.

Gold has gained some 20 percent this year on fund buying driven by favourable currency fundamentals and sharp rises in oil that highlight the metal’s role as a hedge against inflation. More recently it has gained from geo-political tension between Turkey and northern Iraq and the bombing in Pakistan.

Analysts have said that if those factors stay intact, bullion should easily rally to the psychologically-key $800 level hit in January 1980 when gold hit a record $850 per ounce.

“The market is a bit crazy and driven by fear, terror in Pakistan, oil at $90 and weak US dollar,” said a European precious metals trader.

“I would not be surprised to see it above $800 soon. Inflation is definitely a concern,” he added.

But Briggs injected a note of caution due to extreme speculative positioning on the US futures market that pointed to the possibility of a correction before another push higher.

“You have to believe there will be a substantial correction before the $800 level,” he said.

Platinum squeezed

Platinum gathered momentum, taking it to a record high above $1,450 and ounce as supply worries continued to dog the market.

Anglo Platinum, the world’s biggest producer, said it expects to lose up to 1,300 ounces of refined platinum a day after it closed two more shafts at its largest mine.

Dealers and analysts said concerns over supply due to accidents and possible strike action had pushed up one-month lending rates in the past month to between 5-6 percent -- another factor propelling the spot price higher.

Spot platinum hit a record high of $1,454 before easing to $1,443/1,448 an ounce, versus $1,438/1,443 in New York.

“The very real threat of strike action is making it difficult from traders to go short, and should lease rates tighten further we could well see spot prices push on towards $1500/oz,” said analyst James Moore of TheBullionDesk.com.

In other bullion markets, the benchmark August 2008 contract on the Tokyo Commodity Exchange closed 3 yen per gram higher at 2,873 yen after trading as high as 2,883 yen.

US gold futures eased, with the December contract trading down $0.4 an ounce to $768.20.

Bullion dealers in Singapore noted sales of scrap from jewellers and other holders who cashed in on gold’s rally.

In India, the world’s top gold consumer, buyers were hoping for a price correction. Indians consider gold an auspicious metal and offer it as a gift during festivals and weddings.

Palladium fell $2 to $367/370, while silver was down at $13.69/13.74, against $13.74/13.79 in New York.