April 11, 2006
Gold Eagle
LONDON, - Gold jumped above $600 an ounce to its highest in 25 years and silver set a new 23-year peak on Tuesday as funds and investors persisted in widening their exposure to surging commodities.
They poured money into precious metals to diversify their portfolios on worries about inflation, tensions in the Middle East and uncertainties over the dollar's outlook because of the U.S. trade and budget deficits, analysts said.
"At the moment, I wouldn't try to bet against the continuation of the rally," said Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus.
"In terms of fundamentals, it shouldn't be here. In terms of charts, there is not much you can see. It's certainly speculative money which flows here into all precious metals."
Spot gold hit a high of $604 an ounce before easing to $600.80/601.60 by 0918 GMT, against $598.80/599.60 late in New York on Monday.
Gold also surged in other currencies, with the metal rising to a record high in euro terms at 497.98 euros. In terms of the British pound, it spiked to 346.25 sterling, the highest in two decades.
The metal, a traditional hedge against uncertainties in troubled times, has risen more than 16 percent this year, 41 percent in the past 12 months and 100 percent in four years.
Investors have turned to surging commodities markets for investment alternatives to equities, bonds and foreign exchange, where returns have lagged, dealers said.
"We believe that all precious metals are trading above fundamentally justified fair value, but the weight of investor, speculator and commodity-index buying has demonstrated that this does not stop metals trading ever-higher," John Reade, analyst at UBS Investment Bank, said in a report.
Oil surged to an 11-week high on increased tensions between the United States and Iran over Tehran's nuclear aims. Prices have risen more than 13 percent this year.
The funds pushed copper and zinc prices to record highs.
The dollar fell against the euro, making dollar-priced gold cheaper for holders of other currencies.
In Japan, the benchmark most distant February gold contract on the Tokyo Commodity Exchange hit another 18-year high of 2,329 yen ($19.66) per gram on renewed fund buying.
ZERO PREMIUMS
The physical sector in Southeast Asia saw buying as well as sales of gold bars by investors cashing in gold's surge. That kept premiums at zero in Singapore, a regional centre for bullion trading.
Spot silver rose as high as $13.01 an ounce before easing to $12.75/12.78, still above $12.68/12.71 late in New York.
Prices have been rising since Barclays Global Investors last year filed for U.S. regulatory approval of its proposed iShares Silver Trust, which would trade on the American Stock Exchange and track the price of silver.
UBS Investment Bank lifted its silver price forecasts to $14 a month ahead and to $16 in three months, saying the proposed listing of the fund was the most important price driver.
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