The Wall Street Journal-20080115-Gold- Breaking --36-900- Benefits From Tension
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Gold, Breaking $900, Benefits From Tension
New York gold futures hit record highs in a market expecting further Federal Reserve rate cuts that may mean more dollar weakness. It was the metal's first settlement above $900 and was underpinned by inflation fears and global tensions, analysts said.
Nearby January gold gained $5.50 to $901.60 an ounce on the Comex division of the New York Mercantile Exchange, rising as high as $907.30, a spot-month record. Most-active February gold rose $5.70 to $903.40, hitting a contract high of $915.90.
"There is dollar weakness and follow-through buying in gold, with a technical-chart breakout," said John Person, president of NationalFutures.com. "There are fears of a recession and economic meltdown as the Fed lowers interest rates, which is perceived to devalue the dollar even further and is causing investors to flee to the precious-metals arena."
The euro rose to $1.4871. Investors often buy gold as a hedge against dollar weakness and inflation as it is seen as a haven that retains value.
Charles Nedoss, metals analyst with Peak Trading Group, also cited stronger crude oil and the escalation in U.S.-Iran tensions as supportive influences.
New York gold futures began rising during the overnight trade as speculators -- such as hedge funds and exchange-traded funds -- based overseas started buying, said George Gero, vice president with RBC Capital Markets Global Futures. "Risk-averse investors jumped on the bandwagon as $900 resistance was surpassed," he said.
Analysts last month called for gold to test $900, but it broke above this "a lot faster" than many expected, Mr. Nedoss said. Now, he said, many traders look for gold to next target $950, then $1,000. However, Mr. Person anticipates gold first could run into some profit-taking pressure around $920 to $940.
Much may hinge on how a heavy slate of U.S. economic data during the rest of the week influences the dollar, observers said. The main reports include retail sales, industrial production, housing starts and inflation at the wholesale and consumer levels.
"I don't think it will be a single one [dictating gold direction], but the combination of everything will have a snowball effect on the outlook for what is going on in the U.S. economy," said Carlos Sanchez, precious-metals analyst with CPM Group.
In other commodity markets:
CRUDE OIL: Futures made their first gain in four sessions as frigid temperatures were anticipated in the Northeast, the dollar weakened and tensions rose in Nigeria and Iran. Light, sweet crude for February delivery settled $1.51, or 1.6%, higher at $94.20 a barrel on the NYME.
CORN: Prices rose sharply, adding to gains established Friday. March Chicago Board of Trade corn rose 18.75 cents to $5.3475 a bushel.
