The Wall Street Journal-20080129-Speculators Rush to Buy Gold

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Speculators Rush to Buy Gold

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Gold futures set highs yesterday on support from a weaker dollar, stronger crude and equities, supply disruptions and options-related buying, market watchers said.

Platinum and silver also rose.

Nearby January gold rose $16.60 to settle at $927.10, setting a front-month high on the Comex division of the New York Mercantile Exchange. Most-active April gold jumped $16.60 to $932.80 after reaching a contract high of $935.40.

Speculators were buying gold as equities and oil mounted a comeback, the dollar weakened and power disruptions affecting South African mines continued to support the market, said Andrew Montano, director of precious metals at Scotia Mocatta.

Frank Lesh, broker and futures analyst with Future Path Trading, said electricity problems in South Africa weren't as much of a factor as the dollar's weakness and oil's recovery.

Options-related buying also boosted gold as participants bought back previously sold positions and entered into new long trades. Options are the right, but not the obligation, to buy or sell the underlying future.

February gold options expiration prompted the buying as some foreign miners were trying to cover options trades, said George Gero, vice president with RBC Capital Markets Global Futures.

But Mr. Gero cautioned that the gold market was waiting for central bank actions, and "continued strength may weaken after first-notice day."

First-notice day, or the first day when futures contract holders can be notified of an obligation to take delivery of a commodity, for February gold futures is Thursday.

In other commodity markets:

CRUDE OIL: After starting the trading day with losses, futures closed slightly higher, supported by a stronger U.S. equities market and expectations that the Organization of Petroleum Exporting Countries will leave oil output steady at a Feb. 1 meeting. Light, sweet crude for March delivery settled 28 cents, or 0.3%, higher at $90.99 a barrel on the New York Mercantile Exchange.

WHEAT: Prices rose to their day exchange-imposed trading limit of 30 cents a bushel as grain market prices are rising in an effort to lure farmers to plant either corn, wheat or soybeans this spring in the U.S. Chicago Board of Trade March wheat futures gained 30 cents a bushel to $9.63.

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Anna Raff contributed to this article.