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Gold steamrolls to new safe-haven highs

  1. galloper

    1,380 Posts.

    April 26: Gold steamrolls to new safe-haven highs

    Source: Reuters

    New York -- Gold futures muscled to fresh 17-month highs in New York Friday, and bullion reached its priciest in more than two years as capital gravitated toward an asset seen likely to hold value amid uncertainty about the Middle East and the economic recovery.

    Benchmark gold for June delivery rose to $312.50 an ounce at midday, its highest since July 18, 2000, and closed up $3.50 at $312.10. Spot bullion closed at $311.10/60, a price last seen in February 2000, compared to $307.70/8.45 at Thursday’s close and $306.60 at London’s last fix.

    Dealers said speculators and money managers were diversifying into gold as insurance against a weakening dollar, jittery stock markets and a rise in oil prices on the back of worries that the open warfare between Israelis and Palestinians could ignite a regional conflict and line up America’s Arab allies against its war on terror.

    But the real sea change, they said, is the absence of accelerated supply coming from producers, who have scaled back or reversed their hedges because low U.S. interest rates almost eliminated the forward premium earned by selling forward.

    “It’s still being driven by investor buying. And who knows, there might be some producer buying behind it,” said the head of a precious metals trading firm.

    Gold broke to new highs for the year Thursday but slipped in early trade Friday as the dollar steadied from its sell-off, and traders waited for cash options to expire in London.

    The move resumed after options rolled off and the contract vaulted $310, a psychological level above which players had placed buy orders betting yet higher prices would soon follow.

    Gold absorbed money from a falling dollar and stock market as concern about the strength of the U.S. recovery persisted even though the economy expanded at its fasted pace since late 1999 in the first quarter of this year.

    The Commerce Department said Friday in its advance estimate that first quarter gross domestic product rose at a 5.8 percent annual rate. GDP grew at a 1.7 percent rate in the fourth quarter of 2001 as it pulled out of one of the shortest recessions on record.

    The market was expecting an increase of 4.8 percent in the first quarter and dealers were surprised the dollar did not rally on the better-than-expected data.

    “When the reverse occurred, it showed the inherent weakness of the dollar and gold took off,” said Leonard Kaplan, president of Prospector Asset Management.

    Funds helped fuel the rally, seeing gold’s safe-haven allure as Saudi Arabia on Thursday voiced Arab outrage that the United States has not pressured Israel to withdraw from Palestinian areas the tanks and troops it had sent in to root out suicide bombers.

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