Gold hits 25-year high on weak dollar

LONDON: Gold jumped to a new 25-year high on Wednesday as fund buying persisted, driven by a weak dollar, strong oil prices and worries about Iran’s nuclear ambitions.

The bullish sentiment spilled into other metals and sectors, with platinum jumping to a record high and silver hovering below a 23-year peak. Some mining companies in Britain, Australia and Hong Kong gained following sharp price moves.

“The dollar has weakened very dramatically in the last two weeks and the tension over ran gets worse by the day,” Stephen Briggs, economist at SG Corporate and Investment Banking, said.

“It only makes gold go up because people decide that those factors will persuade them to buy. So much money is flooding into the market.”

Spot gold rose as high as $676.25 an ounce, the highest since October 1980, before easing to $673.80/674.80 against $666.20/667.20 late in New York on Tuesday. The metal’s all-time high was $850 in early 1980.

In euro terms, gold jumped to a record high of 534.88 euros, while it rose to 367.79 sterling, the highest in two decades.

Gold has gained around 30 percent this year as investors diversified into precious metals on global tensions, firm oil prices and uncertainty over the dollar’s outlook. Oil rose to almost $75 a barrel, within sight of record highs, as mounting tension over Iran’s nuclear plan compounded worries of global supply disruptions.

Iran threatened on Tuesday to attack Israel in response to any “evil” act by the United States and said it had enriched uranium to a level close to the maximum compatible with civilian use in power stations.

Gold is mainly used in jewellery and can be bought as a hedge against inflation and for future sales when holders need cash in times of trouble. “Given the sharp moves higher over the past few days, the market may be in need of a consolidation,” Yingxi Yu, precious metals analyst at Barclays Capital, said.

“Neverthless, with the key factors supporting the rally largely in place and optimism among the speculative community still strong, we see further gains ahead.”

Sentiment upbeat: “The yellow metal will continue to find support on any dip as ongoing geopolitical concerns, rising oil prices, inflation fears and the weaker dollar continue to fuel the bullish sentiment in gold,” Standard Bank said in a report.

The dollar eased towards a recent one-year low against the euro as investors fretted about the US interest rate outlook ahead of a speech by the Federal Reserve chairman.

In other markets, copper prices edged up towards recent record highs, while UK mining company Xstrata rose 1.2 percent. Rio Tinto shares were up 0.6 percent. Platinum spiked to a record $1,184 an ounce before falling to $1,183/1,187.

The metal was quoted at $1,174/1,179 an ounce in New York. Palladium rose as high as $387 an ounce before retreating to $382/387, against $380/385 in the US market.

Silver was $14.41/14.51 an ounce after rising to $14.53, compared with $14.22/12.32 in New York, but off a 23-year peak of $14.68 hit two weeks ago.

Silver has gained 66 percent this year on hopes that an exchange-traded fund would boost demand. The fund, backed by physical bullion, was launched in the United States on Friday after getting regulatory approvals.

John Reade, analyst at UBS Investment Bank, said the silver ETF saw 21 million ounces of demand during the first day of trading and 32 million ounces by the third day. Reuters