NY Gold Hits 15-Year High in First '04 Session

January 5, 2004
By Alden Bentley

NEW YORK, Jan 5 (Reuters) - Gold futures traded above $425 an ounce for the first time in more than 15 years in New York Monday, extending its watershed rally on the first trading day of 2004 as investors continued to diversify out of the beleagured dollar.

Other precious metals surged as well, but gold is considered a form of currency and is seen as a hard alternative to the greenback. It built on last year's 20 percent gain as the dollar hit a new low against the soaring euro and fell to its cheapest level against the yen in three years.

At the COMEX division of the New York Mercantile Exchange, February gold rose to $425.50 an ounce, its highest since the summer of 1988, as London traders wrapped up for the day.

Fund buying on the floor chased it above the high from February 1990 at $425. By 11:42 a.m. EST (1642 GMT) the benchmark contract had eased back to stand $6.40 higher, at $422.50 an ounce.

"I'm tired. It ran massive stops over $420," a floor broker said, referring to pre-placed buy orders. "The dollar is there (as a factor,) but at some point it kind of was on its own."

Spot gold was quoted at $421.70/2.50 an ounce, up from its New York close at $414.80/5.30 on Wednesday. The exchange was closed on Thursday and Friday for New Year's observance.

Europe's 5-year-old currency rose to $1.2695, making gold more affordable to traders holding euros. The dollar slide snowballed after Federal Reserve Governor Ben Bernanke on Sunday said that while the U.S. economy appears to have turned a corner, the Fed was right to hold interest rates at 45-year lows, given that inflation remains so low.

"No hint that the dollar's fallen too far to fast," James Pogoda, vice president of precious metals at Mitsubishi International Corp, said of Bernanke's remarks. "So keep pressing the same direction, I guess -- dollar lower, gold higher."

Other traders said it looked like silver, in a role reversal, may have lead gold higher. March silver was up 26 cents at $6.225 an ounce, hitting a 5-1/2 year high at $6.30.

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