Spot gold hits record high near $900 on fund spree
LONDON (Reuters) - Spot gold surged to a record high just shy of $900 an ounce on Friday as investors poured into the market, driven by signals that aggressive U.S. rate cuts may be on the cards.
The run higher in gold spurred other precious metals on, with platinum hitting a record high and silver surging to 27-year peaks.
Spot gold hit a record $898.00 an ounce, but later trimmed gains to $896.40/897.10 at 11:10 a.m. EST, compared with $889.90/890.60 quoted in New York late on Thursday.
U.S. gold futures aimed higher, with the most active February contract GCG8 hitting a record $900.10 per ounce.
Dealers and analysts said that while the speed of bullion's current rally had raised the stakes for a corrective sell-off, bullish sentiment was solid.
"There are a number of drivers that support safe-haven buying and continued investment demand -- that ranges from geo-political tensions and expectations for higher inflation to broader macro-economic concerns," said Suki Cooper, metals analyst at Barclays Capital.
The dollar remained on the defensive against the euro after U.S. Federal Reserve Chairman Ben Bernanke said on Thursday that the central bank was ready to take 'substantial' measures to shore up a slowing economy.
The Fed has already cut rates a full percentage point since September. Lower interest rates dent the dollar's yield appeal -- raising gold's profile as an alternative investment.
"The market has been well set up for a run at $900 by the dollar's reaction to Bernanke's speech. But even though we are less than about $5 away, it will face stiff resistance," said Tom Kendall, metals strategist at Mitsubishi Corp.
PHYSICAL BUYING REVIVED
In the physical sector, fears of further rises ignited buying from jewelers in Indonesia and Thailand, but retail investors in other parts of Asia, especially Japan, cashed in on their holdings to take advantage of sky-high prices.
Gold bars were offered at discount of 40 U.S. cents to spot London prices in Tokyo from minus 25 cents last week due to heavy selling from retail investors.
The key gold futures contract for December 2008 delivery on the Tokyo Commodity Exchange TOCOM hit an intraday high of 3,182 yen per gram, its best level since March 1984. It ended 51 yen higher at 3,168 yen.
Platinum hit a record $1,564 per ounce and was last at $1,563/1,567 an ounce, from $1,550/1,555 late in New York.
Silver rallied to a 27-year high of $16.29 an ounce before dipping to $16.24/16.29 an ounce, up from $16.12/16.17.
"Unlike gold, (silver) is still a long way off its all-time high of $49.45 reached in 1980. We see potential for silver to follow gold's lead, and if gold continues to rise, silver could advance as far as $18," Commerzbank analyst Eugen Weinberg said in a note to clients.
Palladium lagged the other precious metals but was still firm, last at $376/380 an ounce from $373/376.
(Additional reporting by Lewa Pardomuan in Singapore)
(Editing by Chris Johnson)
