LONDON, Sept 19: Gold set a new 17-year peak in Europe on Monday above $467 an ounce, ignoring a firmer dollar as speculators continued to buy on the back of inflationary worries and uncertainty about the US economy, dealers said.
Bullion prices have rallied by over $20, or nearly five percent, since last week as funds have rushed to snap up the precious metal, which is traditionally regarded as a hedge against the corrosive effects of inflation.
A lack of selling by European central banks, which have reached the annual limit of a five-year pact to limit sales, has also fuelled the move, along with buoyant physical demand.
Spot gold was at $467.40/468.20 a troy ounce, up from New York’s late quote on Friday of $459.40/460.10.
Gold peaked in 1988 at $488.92 and has not been over $500 since mid-December 1987. Some analysts are calling for gold to move back to such levels in 2006.
In the shorter term, gold may have to pause as some traders say it has become top heavy after the latest influx of buying.
But with gold also buoyant in other currencies and with high levels of economic uncertainty, few were willing to sell the market aggressively, he added.
Financial markets were awaiting Tuesday’s US Federal Reserve meeting to see whether interest rates would be raised in the aftermath of Hurricane Katrina.
Gold has mostly had a tight inverse relationship with the dollar recently, which means it tends to fall when the US currency strengthens.
It did decouple from the euro/dollar in June and seems to be going through a similar phase since last week, with euro-priced gold hitting a record above 383 euros on Monday.
Price chart analysts said gold’s latest rally showed sparse evidence of slowing, with little resistance seen until the $490s, JP Morgan said in a note.
Gold’s ebullience spilled over into other precious metals, with platinum a dollar away from a mid-August peak of $923, which was its highest since April 2004. Silver jumped to $7.37, a 13-week high.
Even palladium, which has slumbered in a tight three dollar range for weeks, managed to break out and scored its highest in just over a month.
Spot platinum rose to $922/927 an ounce by 1451 GMT from $918/923, while palladium gained to $196/200 from $190/193.
Silver rose to $7.34/7.37 from $7.22/7.25. —Reuters
