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Gold nears record-high on dollar, Pakistan turmoil
Reuters
December 30, 2007
Gold rallied to a 7-week high on Monday and close to a record high of $850 on speculative buying driven by a weak U.S. dollar and tensions in Pakistan following the assassination of opposition leader Benazir Bhutto.
But thin trading in Asia ahead of the New Year holidays meant gold and other precious metals were prone to sharp fluctuations. Platinum dropped but held near last week’s record high of $1,542 an ounce.
Spot gold hit an intraday high of $842.90 an ounce before dipping to $842.00/842.80. This was still higher than $837.80/838.50 late in New York on Friday.
“There’s still a potential for further unrest in Pakistan following Bhutto’s assassination. I guess there’s a potential for us to push higher and test the highs around $847 at least,” said Darren Heathcote of Investec Australia in Sydney.
“I think $847 will be the initial technical point to breach. When London comes in, more stops get taken out,” he said.
Gold hit a record high at $850 January 1980 on high inflation linked to high oil prices, Soviet intervention in Afghanistan and the effects of the Iranian revolution. After adjusting for inflation, that level was equal to $2,079 at 2006 prices.
Gold has risen more than 30 percent this year — the biggest annual gain since 1979 — as a number of factors, including a weak U.S. dollar, record-high crude prices, credit market turmoil and falling U.S. rates, boosted its safe-haven appeal.
The latest safe-haven buying was sparked by Bhutto’s killing last week, which plunged Pakistan into crisis. Electoral officials hold an emergency meeting on Monday to decide whether to go ahead with a January election that is aimed at shifting the country from military to civilian rule.
Bhutto’s killing in a suicide attack on Thursday triggered bloodshed across the country and rage against President Pervez Musharraf, casting doubts on nuclear-armed Pakistan’s stability and its transition to civilian rule.
“I think it’s possible to touch $850 in the near term. It moved in a massive range already in the past 24 hours,” said David Moore, a commodity analyst at the Commonwealth Bank of Australia in Sydney.
“It’s possible it might go higher in the near term. It’s obviously been supported by a number factors but probably the thin trading conditions are sort of exacerbating the movements in the gold price at the moment,” he said.
Dollar Heads for Annual Declines Against Euro, Yen on Fed Cuts
Bloomberg
December 31, 2007
The dollar fell for a second year against the euro and declined against the yen, snapping two years of gains, as traders raised bets the Federal Reserve will cut interest rates again to bolster the slowing economy.
The dollar traded at a two-week low versus the euro and yen, after weakening against 14 of the 16 most active currencies this year, as the Fed reduced borrowing costs three times to temper the worst housing slump in 16 years. A U.S. report today may show sales of existing homes held at the lowest since the National Association of Realtors began keeping records in 1999.
“Going into the end of the year, clearly markets have taken another bounce of dollar negativity on board,” said Jeremy Stretch, senior market strategist in London at Rabobank Groep, the third-biggest Dutch bank. “The slowdown in the U.S. economy is clearly going to happen.”
The dollar fell to $1.4712 per euro as of 9:48 a.m. in London from $1.4723 in New York on Dec. 28. It has lost 11.4 percent this year, and reached $1.4967 on Nov. 23, the weakest since the euro began trading in 1999. The dollar slipped to 112.11 yen, from 112.28 on Dec. 28 and 119.05 at the end of 2006.
The British pound headed for a second annual gain versus the U.S. currency, rising 2 percent to $1.9986. The Canadian dollar was poised for its biggest yearly advance since 2003, climbing 16 percent to 97.91 Canadian cents per U.S. dollar.
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