LONDON, May 20: Gold hit its highest level in 27 months on Monday as investors piled into the safe haven asset in face of a sick dollar and fears of renewed violence in the Middle East.
Gold hit $314.00 a troy ounce shortly after the end of European trading, gaining $3 from Friday levels to touch highs not seen since February, 2000.
Dollar weakness, which makes the precious metal more attractive to investors outside the United States, stoked gold’s rally, traders and analysts said.
“With the US dollar on the ropes, at least for now, the yellow metal should remain firm,” said John Reade, metals analyst at UBS Warburg.
Many precious metals analysts see a strong inverse correlation between gold prices and the US dollar index which is at its lowest since October.
“Further weakness in the dollar or profit-taking in the equity markets will almost certainly attract fresh investment,” said Standard Bank in London.
“Gold will continue to gain support from the fund community during the week ahead as they protect their long positions which have risen to their highest levels on over six years,” it said.
Tension in the Middle East and on the India-Pakistan border also supported the precious metal.
Oil price ticks up: The oil market was calm on Monday despite a second Palestinian suicide bombing in Israel in just 15 hours that raised fears of a renewed wave of attacks.
Reference Brent North Sea crude for July delivery ticked up to $26.55 a barrel from $26.36 at the close of trade on Friday.
In New York, the light sweet crude June contract rose 15 cents in early deals to $28.33.
The oil market has been volatile recently as signs of an easing of tensions in the Middle East have weighed against signs of a tighter supply-demand balance.
But traders reacted calmly to news that a Palestinian suicide bomber had blown himself to pieces in northern Israel early Monday, injuring no one except himself.
The oil price usually climbs on rising Israeli-Palestinian violence because of concerns that the bloodshed could trigger disruption to Gulf oil supplies, though most analysts believe the likelihood of widespread stoppages to be remote.—Reuters / AFP
