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Gold eyes $1,000/oz as investors flee stocks PDF Print E-mail
Wednesday, 16 July 2008

REUTERS, LONDON- Gold jumped to a 4-month high above $980 an ounce on Tuesday and was eyeing the psychological $1,000 level as investors fleeing financial market turmoil sought refuge in the precious metal.

Spot gold hit $983.50 an ounce, the highest since March 19 before easing to $982.900/983.90 an ounce at 6:16 am (EDT), against $971.20/972.20 late in New York on Monday.
Gold has risen by more than 7 percent in the past week on financial uncertainty, a sliding dollar and record high oil.
UBS this week forecast gold prices would average $1,000 an ounce in July.
"The dominant change of the last couple of weeks has been increased fears of systemic financial risk," said metals analyst John Reade at UBS.
"There's a lot out there at the moment -- inflation and stagflation fears, the dollar's fall and geopolitical problems but the move higher has primarily been triggered by rising financial risk aversion."
The latest bout of uncertainty was triggered by fears for the future of US mortgage giants Freddie Mac and Fannie Mae.
That hit banking sector stocks and reinforced systemic risks.
"The rumors are out there in the market that there may be more regional banks in trouble," said Darren Heathcote at Investec Australia.
"That's obviously a concern for the market and this has driven people into more hard asset-based investments like gold."
Gold has risen sharply in other currencies as well as the US dollar, reinforcing gold's appeal as a hedge. Against the euro it hit a 4-month high of 615.80 euros an ounce.
Gold hit an all-time high of $1,030.80 back in March in the wake of the near collapse of Bear Stearns.
The precious metal is also supported by oil above $146 a barrel as it is seen as a hedge against fuel-led inflation.
Rising geopolitical tensions between Israel and Iran have helped push crude prices higher, which also supported gold.
"Heightened tensions towards Iran and fears of a meltdown in US financial markets triggered further flight-to-safety demand yesterday," said in a note.
Worries about the US banking system also hit the dollar which hit an all-time low against the euro of $1.6038, further boosting gold's credentials as a safe place for investors to park their funds.
Dealers await a speech from US Federal Reserve chairman Ben Bernanke's testimony later on Tuesday for clues to the future direction of interest rates in the United States.
The market will also be watching US producer prices and retail sales data for June.
Silver rose to $19.27/19.34 an ounce from $19.12/19.18 late in New York on Monday.
Platinum eased to $2,005.00/2,025.00 an ounce from $2,012.00/2,032.00 while palladium was unchanged at $448.50/456.50 an ounce.

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