GOLD prices struck the highest level for almost 25 years, reaching $530.75 per ounce on December 9, — the highest point since April 1981, as investors flocked to the safe haven amid global inflationary pressures. Gold the preceding week had breached the $500 level for the first time in 18 years, before gaining $20 last week.
Gold has surged as investors switch from traditional securities such as shares and bonds into gold and other commodities for bigger returns and on fears about inflation and economic growth. The price of gold has gained about 20 percent this year and has doubled in about five years.
Gold is the hedge to have when you’re not quite sure what you’re hedging against, broker Goldman Sachs said in a report.
This ‘generalized uncertainty’ role for gold looks even more relevant today — uncertainty over the medium term outlook for the dollar looks set to remain, it said.
Tight supply, strong demand and speculation that some Asian central banks would increase gold holdings in their reserves are similarly supportive, although India recently confirmed its policy towards gold remained passive.
But Russia, Argentina and South Africa have expressed interest in increasing their gold holdings, even though European central banks have sold over 100 tons since September.
The Japanese private investors are among the most active buyers of the precious metal, with most of the buying done on the Tokyo Commodity Exchange where the gold and all metal futures contract traded on the exchange ended up by their maximum amount allowable.
The Tokyo gold futures rose by their maximum daily 50-yen limit for the second day on December 12. Open interest, which is the amount of futures contracts bought and not sold, in Tocom gold stood at 533,769 contracts as of December 12, compared with just under 350,000 contracts a month earlier.
More US investors were betting on further gains in the gold price. The latest weekly trading data from the Commodity Futures Trading Commission showed an increase in the total net long speculative position, a bet on rising prices, on the Comex gold contract of 1 million ounces on the week to about 19 million ounces. This is close to the record high in mid-October.
Platinum and Palladium
Platinum price hit a new 25-year high of $1,008 per ounce palladium breached $300 for the first time since April 2004 in the wake of its sister metal.
The previous week platinum had reached $1,000 per ounce for the first time since March 1980, helped by low stockpiles of the metal used to make auto-catalysts for diesel cars and trucks.
On the London Platinum and Palladium Market, platinum climbed to $1,004 per ounce at the late fixing on December 9, from $1,000 the previous week. Palladium stood at $297 per ounce, from $266.
Meanwhile, silver prices breached $9 per ounce for the first time since May 1987. They touched $9.005 briefly on December 9; a 5.0 per cent gain in one week before succumbing to profit-taking.
James Moore, an analyst with TheBullionDesk.com, said silver gained support from gold, as well as fresh highs for copper and aluminium. Although a precious metal, silver is used heavily by industry, particularly by the dentistry and photographic sectors. On the London Bullion Market, silver prices rose to $8.97 per ounce at the lat fixing on December 9 from $8.535 the previous week.
Oil
Opec on December 16, raised its forecast for growth in oil demand next year based on predictions of stronger than expected expansion of the world economy.
The world demand for oil will increase by 1.9 per cent in 2006 to 84.9 million barrel per day, Opec said in a report released in Vienna, updating a previous forecast of 84.8 million bpd.
The forecast is a “slight increase” over its outlook issued in November with demand set to increase in all major regions, Opec said. China is to account for more than one fifth of the increase of 1.6 million bpd.
During the current year, the oil cartel lowered its estimate for demand by 40,000 bpd to 83.3 million bpd. This figure represents an increase of 1.5 per cent against demand in 2004.
The latest Opec report said that production in countries outside the group would be 51.6 million bpd in 2006, an increase of 1.4 million bpd against 2005. Opec, which supplies about 40 per cent of world demand, confirmed that its members had produced 30 million bpd during November.
World oil prices have risen in recent weeks as cold weather descended on the United States northeast, increasing the likelihood of higher fuel demand for the energy hungry region.
Global oil demand is ex-pected to grow at an above-average pace for the rest of the decade, according to the International Energy agency (IEA), the adviser to developed countries.
It forecast global oil demand to rise by an average 1.8 million barrel a day through to 2010.
The IEA raised its demand forecast for 2006 to 1.79 million bpd, an increase of 130,000 bpd from last month. The International Energy agency said that the extreme volatility seen in global oil demand between 1998 and 2005 was likely to continue and could even increase.
