Gold Hits New High on Surging Euro

Dec. 2, 2003
By Veronica Brown

LONDON (Reuters) - Gold jumped in Europe on Tuesday to its highest in more than 7-1/2 years for the second session in a row as fund buyers seized on a surging euro and news that Barrick Gold Corp would reduce its forward sales to zero over time.

The chief executive of Barrick said the firm would no longer sell its gold forward at set prices, announcing a change in its long-established hedging policy.

Greg Wilkins told Reuters the world's third biggest gold producer and largest hedger would look at ways to reduce its forward sales program in a measured way.

"This represents one of the medium term shocks I've been highlighting that could happen in the gold market and that is that we might see faster than expected producer de-hedging next year," said John Reade of UBS Investment Bank.

"They said they're looking at ways to reduce their hedge book but are not under pressure to do so. That means possibly buy back, possibly reducing their hedge book to zero over time -- that's the new bit," he added.

The euro climbed to a record high against the dollar as sentiment on the U.S. currency remained negative given geo-political worries and a huge U.S. current account deficit that continues to overshadow strong U.S. economic data.

A weaker U.S. currency makes dollar-denominated gold less expensive for holders of other currencies like the euro and the yen.

Spot gold was quoted at $402.95/403.70 an ounce by 1605 GMT (12:05 p.m. EST) after hitting a high of $405.55 -- last seen in late February 1996. It also compared with $402.25/403.00 last quoted in New York on Monday.

London dealers fixed gold on Tuesday afternoon at $401.35. The euro was at $1.2085/86 after hitting a new lifetime high of $1.2089 earlier.

Dealers put key support at $395 and resistance at $405.00, with an eventual upside target of $415.00.

Gold failed twice in recent sessions to dig in above $400 an ounce as speculators took profits and rolled long positions before the December contract went into delivery last week.

But analysts said the market was poised for further gains having successfully crossed $400.

Ross Norman of TheBullionDesk.com said: "It wouldn't be surprising to see a small step back before moving higher again. We suggested we would see a high of $415.00 in the year -- I think we will see it at the closing end of the year.

"There have been very good volumes sold just above $400...but it looks like the bulls have been taking the high ground and we should still see good volumes going through for another week or so -- and of course the bulls love nothing better than a quiet market to give the price a lift."

In other precious metals, spot platinum moved up again to a fresh 23-year high at $777.00 an ounce, ahead of a statement expected this week from Anglo American platinum on its production plans.

The metal was last quoted at $775.50/780.50, compared with $769.00/774.00 previously.

Silver cooled off from Monday's surge higher in line with gains on gold to a fresh 3-3/4-year high at $5.52 an ounce.

The metal was last quoted at $5.48/5.50, from $5.44/5.46 late in New York on Monday. Palladium moved up to $188.00/193.00 from $186.00/193.00.

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