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Gold hits fresh peaks near $850, Oil hits $98 a barrel

Gold hits fresh peaks near $850, Oil hits $98 a barrel

Forbes
November 7, 2007

LONDON (Thomson Financial) – Gold raced to a series of fresh 28-year highs and is currently just 1 pct below its historic peak as the dollar sank against major currencies and record oil prices stoked inflation jitters.

The precious metal moves in the opposite direction to the dollar as gold is seen as an alternative asset and moves in line with high oil prices as investors hedge against energy-led inflation.

The weak dollar, which hit yet another low against the euro this morning, spurred buying as it made commodities denominated in the greenback cheaper for those trading in other currencies.

At 10.16 am, spot gold was trading at 839.38 usd an ounce, against 821.30 usd in late New York trade yesterday, having earlier hit 845.58 usd, its fresh peak in almost 30 years.

Analysts are now calling for the metal to hit and even surpass 850 usd, the all time high set in January 1980.

‘With this weaker dollar we will see it (gold) push through 850 usd and even 860 usd today,’ said Ben Coleman, commodities trader at Trade Index. ‘Currency is having a big call on what’s going on with gold, oil and metals,’ he said.

Meanwhile, risk aversion in the equity markets, as fears the US subprime debacle will mean slower growth going ahead, sparked a rush towards safer assets like gold.

‘As long as the financial markets remain fragile and investors risk averse, gold prices will be a beneficiary in our view,’ said HSBC (nyse: HBC news people ) analyst James Steel.

Looking ahead, oil is expected to top 100 usd a barrel in the very near future. Today, markets will see if US crude stocks are shown to have fallen last week, as expected, in a weekly report due out at 3.30 pm London time.

New York’s WTI benchmark hit a record of 98.43 usd a barrel this morning, sparking already intense fears inflation is going to impact markets.

‘The flood of speculative cash pouring into oil has resulted in a breach of 100 usd a barrel very much on the cards for today,’ said Bank of Ireland (nyse: IRE news people ) analyst, Paul Harris (nyse: HRS news people ).

Gold has gained over 30 pct since January, oil’s price has almost doubled and the dollar has lost over 10 pct of its value against the euro since the start of this year.

With the yellow metal near its all time record, not many participants are calling a price top.

‘If we see a sell-off it will be aggressive,’ said Coleman at Trade Index. ‘(But) levels here mean it’s hard to pick a top.’

Elsewhere, other precious metals surged, following in gold’s footsteps and as they garnered strength from the dollar’s weakness.

Silver is now comfortably over 15 usd, previously seen as key resistance level, platinum hit a record high and palladium hit its highest price since April.

Silver was trading at 15.86 usd an ounce against 15.32 usd in New York yesterday, having hit 16.18 usd — its highest price since April last year.

Platinum was steady at 1,471 usd an ounce from 1,472 usd, having earlier set a historic peak at 1489.50 usd. Palladium rose to 376 usd from 375 usd, after striking its highest price of the year of 384.50 usd.

 

Dollar Slumps to Record on China’s Plans to Diversify Reserves

Bloomberg
November 7, 2007

Nov. 7 (Bloomberg) — The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation’s $1.43 trillion of foreign exchange reserves.

The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar. The New York Board of Trade’s dollar index dropped to 75.21 today, the lowest since the gauge started in March 1973.

“Further weakening of the dollar is very likely,” said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region’s second-biggest lender. China may “diversify out of dollar holdings.”

The U.S. currency slumped to $1.4704 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4671 as of 7:15 a.m. in New York, from $1.4557 late yesterday. The dollar dropped the most in two months against the yen, trading as low as 112.87 yen. The euro fell against the yen to 165.84, from 166.99 yesterday.

The U.S. dollar index may be due for a reversal, according to a technical indicator. Its 14-day relative-strength measure fell to 21.38 today, below the 30 mark, which may signal the currency’s decline has bottomed out.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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