Gold passes $900 on dollar weakness

Neil Dennis
Financial Times
Monday January 14, 2008

Gold surged to a record above $900 an ounce on Monday as expectations of aggressive interest rate cuts pushed the dollar lower.

By mid morning in London, spot gold hit a record $914 a troy ounce, up 1.8 per cent from Friday’s close.

Gold’s latest rise was driven by fresh weakness in the dollar. Metals, which are priced in dollars, become cheaper to buy in other currencies as the US unit slides. The dollar fell 0.6 per cent against the euro and by 1 per cent against the yen in early London trade.

The safe haven appeal of precious metals was boosted by fears of more shocks in financial markets with further large losses related to sub-prime lending expected from a number of major US financial institutions which report fourth quarter results this week.

”Gold continues to receive support from the uncertainty in the financial markets, and is likely to appreciate for as long as these uncertainties dog the market,” said James Steel at HSBC.

A majority of analysts polled by the London Bullion Market Association last week said they believed gold would reach $1,000 this year.

“There is blue sky ahead of us and there is room for gold to go higher,” said Darren Heathcote of Investec Australia: “We are in an unchartered territory really. We have a weaker dollar and that’s encouraged people to buy gold.”

However, high gold prices have had a damaging effect on physical buying by jewellery makers, but the latest data from the Commodity Futures Trading Commission showed that speculators have continued to increase their bets that bullion will rise further.

Full article here.