Gold rebounds to hit new peak
Reuters

LONDON - Gold rebounded to hit a new 25-year high today after a recovery in the dollar, and the metal targeted the next big level of $700 an ounce on positive momentum, dealers said.

The market saw volatile business, falling as low as $660,40 on profit-taking triggered by a weakness in oil but bouncing back later to set a high of $677,10 in the afternoon trade. Spot gold was quoted at $677,00/67800 in afternoon trade, compared with $666,80/667,80 late in New York yesterday.

"Technical indicators suggest that the market has been overbought, but looking at the fundamental side, there are very good reasons for prices to go up," said Michael Widmer, analyst at Macquarie Bank.

Inflation worries, geopolitical tension in the Middle East and the dollar outlook had lifted gold’s appeal as a safe-haven investment and money was pouring into the sector, he said.

The metal has risen 30% this year and doubled in three years. Gold’s all-time high was $85O, set in early 1980.

World Gold Council chairman Pierre Lassonde said yesterday he saw gold hitting the record-high level over the next 18 months.

"Overall sentiment still appears to be positive and this is unlikely to mark a reversal of the price uptrend," Barclays Capital said in a report.

Analysts said gold was likely to trade in a wide range of $645 to $675 in coming days and traders may turn to the currency market for direction ahead of a US jobs report on Friday.

The dollar fell after European Central Bank suggested euro zone interest rates would rise again in June. The US currency was broadly stronger in the earlier session.

A weak US currency makes dollar-denominated gold cheaper for other currency holders and lifts metal demand.

In industry news, Barrick Gold Corp. said it reduced its hedge book, a pile of forward gold sales contracts, by 5,7 million ounces as of yesterday.

The company which became the world’s biggest gold miner with its takeover of Placer Dome earlier this year, said it intended to eliminate 2 million more ounces by the end of the year, and 2,8 million from its corporate contracts by the end of 2009.

"With the UN Security Council set to pass a resolution on Iran shortly, traders will be keeping a close eye on the energy market as sanction could restrict oil exports from one of the world largest producers," James Moore of TheBullionDesk.com said in a daily note.

Oil dived below $72 a barrel following news US gasoline stocks had risen for the first time in two months, though the struggle to end Iran’s nuclear ambitions underpinned the market.

The US, Britain and France introduced a UN Security Council resolution on Wednesday demanding Iran suspend uranium enrichment that the West suspects is part of a secret nuclear weapons program.

The text, which is still opposed by Russia and China, does not contain sanctions but goes further than a Security Council resolution approved in late March.

In other precious metals, silver jumped to $14,25/14,35 an ounce from $13,69/13.79 in the U.S. market. It hit a 23-year peak of $14.68 two weeks ago.

Platinum rose by $2 to $1,177/1,183 an ounce, but still away from a record $1,184 the previous day.

Palladium was at $378/383 an ounce, versus $375/380. The metal rose to its highest since April 2002 at $387 yesterday on fund buying.