By Glenys Sim
Jan. 11 (Bloomberg) -- Gold rose to a record and silver matched its highest level since 1980 as a weakening dollar increased the allure of the metals as alternative investments.
The dollar was headed for a third weekly loss against the euro on bets benchmark borrowing costs in the U.S. will fall below those in Europe for the first time in more than three years this month. The currency declined after Federal Reserve Chairman Ben S. Bernanke suggested policy makers will have to cut interest rates to counter risks to the economy.
``The lift in the gold price followed a softening of the U.S. dollar against major currencies, after both the Bank of England and the ECB decided to leave interest rates unchanged,'' David Moore, a commodity strategist at Commonwealth Bank of Australia, said by e-mail from Sydney.
Gold climbed 31 percent in 2007, its seventh straight year of gains and the longest rally since at least the end of World War II. Prices soared as record oil costs drove up inflation and supplies from South Africa, the world's biggest producer, dropped to the lowest in 84 years.
Investors are switching to gold because of credit market turmoil. The market for collateralized debt obligations, loans packaged into new securities, dried up after surging subprime mortgage defaults led to rating downgrades and convinced many investors to buy only the safest debt.
The world's biggest financial institutions have written off about $100 billion in subprime losses.
More Gains
Bullion for immediate delivery climbed as much as $4.60, or 0.5 percent, to a record $897.90 an ounce today, and traded at $891.22 at 10:02 a.m. Singapore time.
Gold for February delivery rose as much as $6.30, or 0.7 percent, to $899.90 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange, its highest ever. The contract traded at $893.10 an ounce at the same time.
The $900 level for gold is a psychological round number that investors are aiming for, said Burg.
``We may see some selling as it approaches $900, which may bring prices back down, but gold definitely has the potential to cross that mark on the euro-dollar relationship, a weakening U.S. economy and oil prices,'' he said.
Rising energy costs have fueled the rally as the metal is traditionally viewed as a hedge against inflation, Gerard Burg, minerals and energy consultant at National Australia Bank Ltd., said by phone from Melbourne.
Oil Prices
Oil rose 59 cents, or 0.6 percent, to $94.30 a barrel in after-hours trading on the New York Mercantile Exchange at 10:03 a.m. in Singapore. The dollar fell the most against the euro in almost two months yesterday and traded at $1.4790 per euro at 10:05 a.m. in Singapore after $1.4804 late yesterday in New York.
Silver for immediate delivery rose as much as 10 cents, or 0.6 percent, to $16.24 an ounce, to match its highest level since December 1980, according to Bloomberg data. The metal traded at $16.13 an ounce at 10:05 a.m. in Singapore.
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