Momentum
ushers gold above $1,000/oz
By Humeyra Pamuk and Veronica Brown Humeyra Pamuk And Veronica
Brown – Tue Sep 8, 11:15 am ET
LONDON
(Reuters) – Gold powered through the $1,000 per ounce psychological
barrier on Tuesday, carried by a wave of pent-up technical
momentum and dollar weakness, with some analysts eyeing last
year's record high at $1,030.80.
Some investors were also seeing the spike in gold as a warning
signal to stock market bulls and were fretting about the result
of central banks and governments pumping billions of dollars
into banking systems to boost growth.
Spot gold rose to $1,007.45 an ounce, its highest since March
2008, when bullion touched the $1,030.80 record. It was trading
at $1,001.75 an ounce by 1442 GMT (10:42 a.m. EDT), after
briefly dipping below $1,000, and versus $993.85 an ounce
late in New York on Monday.
U.S. gold futures for December delivery rose to $1,009.4
an ounce, before easing to $1,006.80 an ounce, versus Friday's
close at $996.70 an ounce before the U.S. long weekend.
"Gold's probably the most technically traded financial
instrument in the world," analyst David Thurtell at Citigroup
in London.
"Where can it go? If it closes through $1,010 and plus
tonight, you'd have to think there would be a lot of very
nervous shorts around that are getting close to covering,
and then it really could pop and go up another $50 quite quickly,"
For a technical story on gold, see and for a snap analysis
on gold's price prospects, see
But the sustainability of the precious metal's rally above
$1,000 an ounce, which also helped boost palladium and silver
to 2009 highs, was in question.
UBS analyst John Reade said in a note to clients that gold
options had moved sharply after breaking through $1,000.
"Today's move in implied volatility suggests...that
a scramble for upside gold options could lead the spot gold
price higher," he said.
"We are unconvinced that all the ingredients are in
place for a sustained surge higher in gold," he added.
Implied volatility is a measure of demand for options, which
investors use to take advantage of, or protect themselves
against, sharp movements in spot rates.
Spot gold has now made three attempts to rise and stay above
$1,000, including Tuesday's push. The market stayed above
the key level for one day in February this year and three
days in record-setting March 2008.
SUSTAINABLE?
Despite gold hitting $1,000, it is far from an inflation-adjusted
record, which analysts at GFMS have put as high as $2,079
per ounce.
Some analysts have said the higher gold price reflects uncertainty
across markets about how central banks will untangle themselves
from fiscal stimulus aimed at reviving economic growth, as
well as dollar weakness.
"Gold is celebrating because the day when inflation
might return is getting sooner rather than later," Ashok
Shah, chief investment officer at London and Capital.
"As long as the authorities are intent on not reversing
their policies then gold will remain in demand and it will
be wanted."
Investment action took a break, with holdings in the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust,
standing at 1,077.63 tonnes as of September 7, unchanged from
Friday, denting the price prospects for gold.
"We are still skeptical that this is a sustainable rally,"
said Andrey Kryuchenkov, an analyst at VTB Capital.
"There is very little reason to be long gold, with already
record spec long positions accumulated in the market."
In other metals, silver hit a 13-month high of $16.81 an
ounce and was at $16.69 an ounce versus $16.29 an ounce. Palladium
touched $296.50 an ounce, its highest since September last
year. It was last at $294.00 an ounce versus Monday's $291.50.
Platinum was at $1,283.50 an ounce versus $1,255.00 an ounce
on Monday.