futures rise $1,000 on flight to safety By Frank Tang and Jan Harvey
Friday February 20, 2009, 10:53 am EST
YORK/LONDON (Reuters) - Gold futures rose above $1,000 an
ounce on Friday as jittery investors turned to the yellow
metal to preserve wealth amid a tumbling stock market.
Long-term inflation worries fanned by the massive U.S. economic
stimulus package signed into law by President Barack Obama
this week has driven investors into gold, which is perceived
as the most likely asset to hold its value if the dollar starts
"I think there's a little bit of panic out there. Equities
are setting new lows and gold is the place to run to. I don't
think there's much more than that," said Robert MacIntosh,
chief economist at Eaton Vance in Boston.
U.S. gold reached its highest level of the past seven months.
Gold futures for April delivery on the COMEX division of
the New York Mercantile Exchange rose $17.70 to $994.20 an
ounce at 10:32 a.m. EST. They rose to a session high of $1,000.30,
their highest level since July 16.
Spot gold jumped to $998.50, its strongest level since March
18. It was at $991.95 an ounce, up 1.9 percent against $973.75
in New York late on Thursday.
The metal is poised to rise further, possibly targeting last
March's all-time high of $1,030.80 an ounce, analysts said.
"The rally we've seen in the last few days has been
very much led by investment demand," Barclays Capital
analyst Suki Cooper said.
"Investors aren't looking at the normal drivers -- they
are sidelining the dollar strength, sidelining deflationary
concerns and lower oil prices. They are very much buying gold
as a safe-haven asset," Cooper said. "There is potential
for us to breach the $1,000 level."
Saxo Bank senior manager Ole Hansen said the deteriorating
macroeconomic picture and inflows into exchange-traded funds
were currently the main influences on the gold price, now
that the metal's usual relationship with the dollar had broken
More investment flowed into precious metals-backed ETFs on
Thursday, with figures released showing both the largest gold
ETF and the biggest silver-backed fund climbing to record
New York's SPDR Gold Trust said its holdings rose nearly
five tonnes to a record 1,028.98 tonnes on Thursday, while
the iShares Silver Trust's silver holdings climbed 18.4 tonnes
to an all-time high of 7,892 tonnes.
Equity markets tumbled on Friday, with world stocks dropping
to their weakest levels since November. The U.S. Dow index
hit a six-year low on Thursday. Falling stocks boost the appeal
of safe-haven assets like gold.
The precious metal's usual external drivers, oil and the
dollar, exerted little influence. Gold traditionally moves
in the opposite direction to the U.S. currency, as it can
be used as a hedge against dollar weakness, and in line with
Grim euro zone data further pressured the euro versus the
dollar. Key gauges of euro zone services and manufacturing
activity released on Friday unexpectedly crashed to new lows
Oil prices, which often pull gold in their wake, weakened
as fears over the faltering global economy depressed the demand
Among other precious metals, spot silver climbed to $14.47
an ounce, up 3.2 percent from its last finish of $13.01.
Spot platinum edged up to $1,083.50 an ounce from its late
Thursday quote of $1,066.50, while spot palladium was largely
unchanged at $213.50.