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Gold reaches record high 1,000 dollars
LONDON
Petroleumworld.com, Mar 14, 2008
Gold prices breached 1,000 dollars for the first time on Thursday as the precious metal benefited from a plunging dollar and its safe-haven status amid fears of rising inflation.
Investors are funnelling their cash into commodities like gold as they seek refuge from volatile world stock markets, the collapse of the dollar and growing fears about a US-led economic slowdown, traders said.
After reaching the milestone of 1,000.45 dollars, gold stood at 994.05 dollars per ounce on the London Bullion Market, up from 975.50 dollars late on Wednesday.
"Ongoing inflationary pressure from rising oil prices and continued concerns about the US economy and credit liquidity have led sentiment to turn more positive," said James Moore, analyst at TheBullionDesk.com.
Demand for the precious metal, which is used in jewellery, dentistry and electronics, is spearheaded by Asian economic giants China and India.
Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The dollar slumped on Thursday against both the European single currency and the yen as fresh credit jitters swept across global markets, dealers said.
Many analysts expect the US Federal Reserve to slash its key lending rate at a scheduled meeting next week in a bid to ward off a potential US recession.
Investors generally prefer the currencies of countries that have higher interest rates as they can reap better yields.
On the foreign exchange market on Thursday, the euro jumped as high as 1.5625 dollars amid mounting concerns over the US economy, dealers said.
The dollar also plunged below the key 100 yen level for the first time in 12 years, falling as low as 99.78 yen.
"The gold-favourable environment continues to evolve positively for the metal, with expectations of further Fed rate cuts and inflationary concerns boosting safe-haven buying," said analysts at Barclays Capital.
Gold has risen by about 17 percent so far this year, underscored also by supply problems in South Africa -- the world's largest producer.
Stoppages by miners protesting unsafe working conditions and ongoing power cuts in South Africa have hampered supplies.
At the start of January, gold jumped above 850 dollars per ounce, smashing a 28-year-old record, and has been on an upward trend ever since.
There are widespread fears that the US economy is lurching into recession and record oil prices of almost 111 dollars have stoked inflationary pressures.
Global demand for gold is also surging owing to increased jewellery purchases in China and India, according to the World Gold Council.
Demand was additionally being fuelled by higher purchases of the metal by industry and wealthy individuals, it added.
The 1,000-dollar threshold was likely to remain largely symbolic, according to BaseMetals.com analyst Perrine Faye.
"It's a symbolic threshold that many people wanted to see crossed, similar to 100 dollars for oil, 20 dollars for silver and 1.50 dollars for the euro," Faye said.
"Investors like to see a clear finish line in round numbers but this figure is simply part of a trend that sees a rush to commodities in a period of economic uncertainty," she added.
Story by Roland Jackson from AFP
AFP 13 1610 GMT 03 08Copyright© 2008 respective author or news agency. All rights reserved.
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