December 31, 2007 / 1:04 AM / 12 years ago

UPDATE 2-Gold nears record-high on dollar, Pakistan turmoil

 (Updates prices, adds quotes)
 By Lewa Pardomuan
 SINGAPORE, Dec 31 (Reuters) - Gold rallied to a seven-week
high on Monday and close to a record high of $850 on
speculative buying driven by a weak U.S. dollar and tensions in
Pakistan following the assassination of opposition leader
Benazir Bhutto.
 Gold has risen more than 30 percent this year -- the
biggest annual gain since 1979 -- as a number of factors,
including a weak U.S. dollar, record-high crude prices, credit
market turmoil and falling U.S. rates, boosted its safe-haven
 "There's still a potential for further unrest in Pakistan
following Bhutto's assassination. I guess there's a potential
for us to push higher and test the highs around $847 at least,"
said Darren Heathcote of Investec Australia in Sydney.
 "I think $847 will be the initial technical point to
breach. When London comes in, more stops get taken out," he
 Spot gold XAU= hit an intraday high of $843.20 an ounce
before dipping to $842.60/843.40. This was still higher than
$837.80/838.50 late in New York on Friday.
 Gold hit a record high at $850 January 1980 on high
inflation linked to high oil prices, Soviet intervention in
Afghanistan and the effects of the Iranian revolution. After
adjusting for inflation, that level was equal to $2,079 at 2006
 The latest safe-haven buying was sparked by Bhutto's
killing last week, which plunged Pakistan into crisis.
Electoral officials hold an emergency meeting on Monday to
decide whether to go ahead with a January election that is
aimed at shifting the country from military to civilian rule.
 Bhutto's killing in a suicide attack on Thursday triggered
bloodshed across the country and rage against President Pervez
Musharraf, casting doubts on nuclear-armed Pakistan's stability
and its transition to civilian rule.
 "I think it's possible to touch $850 in the near term. It
moved in a massive range already in the past 24 hours," said
David Moore, a commodity analyst at the Commonwealth Bank of
Australia in Sydney.
 "It's possible it might go higher in the near term. It's
obviously been supported by a number factors but probably the
thin trading conditions are sort of exacerbating the movements
in the gold price at the moment," he said.
 Thin trading in Asia ahead of the New Year holidays meant
gold and other precious metals were prone to sharp
fluctuations. Platinum dropped but held near last week's record
high of $1,542 an ounce.
 "It will probably try $845-$850 later on in low volume as
long as the dollar remains weak against the yen and the euro,"
said Peter Tse, a dealer at Scotia Mocatta in Hong Kong.
 "The key is no-one dares to get short ahead of the
holiday," said Tse, adding that gold's direction after the New
Year break would still be determined by movements in
 The dollar was under pressure Monday as expectations of
more U.S. interest rate cuts enhanced the euro's yield
advantage, while the yen benefited from a reluctance to hold
risky positions over the holidays.
 The euro rose to $1.4736 EUR= from $1.4714 late in New
York on Friday and just off a two-week high of $1.4747. The
dollar also dipped to 111.97 yen JPY= from 112.63 late on
 Crude oil CLc1 rose above $96 a barrel on political
instability in Pakistan and growing tensions between Iran and
the United States over Tehran's nuclear ambitions.
 The Tokyo Commodity Exchange was closed for a holiday. The
benchmark December 2008 gold futures <0#JAU:> on the Tokyo
Commodity Exchange ended 8 yen per gram higher at 3,060 yen on
 The most-active February gold contract GCG8 on the COMEX
division of the New York Mercantile Exchange added $3.6 to
$846.3 an ounce in electronic trade.
 Platinum XPT= fell to $1,531/1,536 an ounce from
$1,534/1,538 late in New York. The metal hit a record high of
$1,542 last week on supply concerns following deadly mining
accidents in South Africa, the world's main producer.
 Silver XAG= rose to $14.88/14.93 an ounce from
$14.72/14.77 late in New York. Palladium XPD= gained to
$364/368 an ounce from $363/366 an ounce.
  Precious metals prices at 0621 GMT
 Metal             Last    Change  Pct chg  YTD pct chg
 Spot Gold         842.50    2.30   +0.27     32.53
 Spot Silver        14.88    0.13   +0.88     15.80
 Spot Platinum    1531.00   -2.00   -0.13     35.25
 Spot Palladium    364.00    2.00   +0.55      9.64
 Euro/Dollar       1.4744
 Dollar/Yen        111.86
  (Editing by Ben Tan)

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