Gold Eyes Renewed Strength

Feb, 18. 2004
By: Daniel Thole

JOHANNESBURG (Mineweb.com) – Gold may be poised to again test fourteen year highs as the dollar plumbs new lows, sending investors back into the security of the metal markets.

Historic dollar weakness led to a spike in gold earlier today - the metal opened the South African session at $415/oz, and traded as high as $416.35. Silver hit an eight year high earlier in the day and was last at $6.81/oz.

Gold hit its highest level since 1990 on January 13, when it traded as high as $424.50. That strong move pre-empted a slide to $395/oz on February 6, ushering in two weeks of directionless, indifferent trade.

But this morning, the euro hit an all time high of $1.2922 against the dollar in Asian trade, setting the stage for renewed strength in the gold market. A trader at a leading Johannesburg based investment bank said a move through the vital $1.30 level was now inescapable. “Its very likely – the (US Federal Reserve) guys said they are not raising rates soon,” he said. A move through $1.30 would likely see gold back up around $425/oz, ahead of its highest level this year, and back at fourteen year highs, the trader said. The market is not holding its breath for any intervention by the European Central Bank to weaken the euro, he said.

He said many market players had taken the view that gold could take a run at $450/oz in the short term. “The run in the euro could last months, or even until the end of the year. It still has the potential to go higher, and gold will go with it,” the trader said.

The trader said that the price action had been solely based on dollar weakness, with little else apparent as a driver for gold. “This is just dollar weakness –nothing else. The dollar has absolutely no power, there is nothing in the dollar, the euro can just keep on going,” the trader said. He said the speculative nature of trade that had characterized the market today meant that gold’s gains may not be sustainable.

The soft dollar also gave the rand a major boots over night – the local currency was last trading at R6.54 in early afternoon trade, after trading as strong as R6.51. The local currency also managed

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