LONDON, Feb 19: Gold surged to a seven-month high on Monday because of investor buying as the dollar weakened, and analysts expect the precious metal to push higher over coming days and weeks.
Spot gold was quoted at $670.90/$671.70 an ounce versus $669.00/669.70 an ounce late on Friday in New York. Earlier it hit an intraday peak of $673.20, the highest since July 17 2006 when it traded at a $676 high.
It's largely dollar weakness, said David Thurtell, analyst at BNP Paribas. We're going to see more dollar weakness and if that's the case the outlook for gold is good. A lower US currency makes dollar-denominated metals cheaper and more attractive for holders of other currencies.
The dollar fell to a six-week low against the euro and five-week low against the yen on speculation that the US Federal Reserve could cut interest rates in coming months after a run of weaker than expected US economic data.
Analysts said violence in Iraq and bombs on a train going to Pakistan from India are also a plus for gold, seen as a safe-haven against rising security risks.
However, some dealers think the Lunar New Year holiday breaks would leave gold markets subdued across much of Asia, while the US Presidents Day holiday would dampen interest in North America.
Japanese buying in holiday-thinned trade was part of the reason behind Monday's gold price rise, which was partly checked by a subdued oil prices, traders said.
Gold is also used as a hedge against oil-led inflation. Crude oil prices slipped on expectations for warmer weather in the United States, despite current cold weather that has raised heating oil demand in the world's largest energy consumer.
Everything except the oil market is lining up for gold, Africa, where workers started an illegal pay strike last Tuesday, has worried the market.
Platinum was at $1,215/1,220 an ounce, down from an earlier three-month high of $1,219 and $1,201/$1,206 in late New York trade on Friday.
Platinum prices slipped after miners at the world's second biggest platinum producer, South Africa-listed Implats ,ended a strike they started last Friday at the firm's biggest mine over medical issues.—Reuters