Gold takes aim at $700, may need to pause first
LONDON: Gold jumped to its highest in seven months on Monday and is now targeting the psychological $700 level as geo-political worries and firmer oil prices attracted investors back to the market.
Spot gold rose as high as $668.20 an ounce in Asian trading, before losing momentum in Europe and dipping back to $663.20/663.90, down from $666.50/667.20 late in New York. Gold rose around 1 percent in the US market on Friday after crude oil regained $60 a barrel for the first time since early January, spurring fund buying and short covering.
Firm oil prices raise gold’s appeal as a hedge against inflation.
Investors were also putting their money into gold as tensions increase in the Middle East, with European Union foreign ministers agreeing sanctions on Iran to raise pressure over its nuclear programme.
“We’ve seen a lot of risk aversion buying over the last couple of months. Many investors are concerned about the Middle East, probably more so than they have been for a while,” said John Reade, metals analyst at UBS Investment Bank.
Pause: But a move back over $700 which would first need to see gold break through last July’s peak of $676 would not be a one-way ride, traders and analysts said.
“I am cautious here. We’ve seen a lot of money come in at some stage I would expect a bit of a pullback,” Reade said. Others said oil prices would need to see a sustained move over $60 to bring more money to gold. Oil futures fell more than 1 percent to $59 a barrel after the oil ministers of Saudi Arabia and Qatar said OPEC may well keep output unchanged at its March 15 meeting.
David Holmes, director of precious metals at Dresdner Kleinwort Wasserstein, also felt the market might need to take a breather.
“$700 is clearly within sights. The question is whether we have a bit of a pullback first and consolidation to build a base at these higher numbers. I suspect that’s on the cards.” Gold tried and failed to crack this level back in July 2006 and several other attempts to rally since have also ended in failure around $650. Gold hit a then 26-year high of $730 on May 12, 2006. reuters