Gold hovers below 25-year highs, targets $700/oz Tue May 2, 2006 12:09 PM GMT Printer Friendly Top News Blast in north Gaza kills two security officers
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By Atul Prakash
LONDON (Reuters) - Gold drifted higher in Europe on Tuesday to trade below 25-year highs after easing overnight, with investors targeting the next big level of $700 an ounce on firm oil prices and political tension in the Middle East.
Gold, which has jumped $230 or 54 percent in the past 12 months, has been attracting money from other markets because of its impressive performance. The bull trend is expected to continue this year, analysts said.
"The market is looking very strong. It likes big round numbers and the next obvious target is $700. It's very possible, going at this rate," a precious metals analyst in London said.
"We are expecting further dollar weakness over the course of this year. That could be one of the key catalysts for prices to rise further."
Spot gold fell as low as $653 before rebounding to $658.50/659.50 by 0955 GMT, compared with $657.60/658.60 late in New York on Monday, when it hit a 25-year high of $661.10 on fund buying sparked by concerns about Iran's nuclear programme.
The dollar traded near its one-year low against the euro. A weaker U.S. currency makes dollar-denominated gold less expensive for holders of other currencies and lifts gold demand.
Investors remained upbeat because of strong returns in the gold market. Geopolitical worries, firm energy prices and instability in currency markets had been prompting funds to diversify into commodities, analysts said.
"Oil market profits are being diverted into gold in some instances as oil traders look to bank profits in this area, preferring gold as a potentially more stable alternative investment," said John Meyer, analyst at Numis Securities Ltd.
FIRM ENERGY PRICES
Oil rose above $74 a barrel to trade near record highs on persistent fears about supply disruption, especially from Iran.
U.N. ambassadors from the United States, Britain and France are expected to introduce a Security Council resolution this week to make Iran comply with demands to stop its nuclear enrichment.
Failure to do so could result in Tehran facing U.N. sanctions, although Russia and China, the other two veto-wielding Council members, say they do not favour such a move for now.
Gold is often seen as a safe-haven buying in difficult times. People also consider it as a hedge against inflation.
In Japan, the April 2007 gold futures contract on the Tokyo Commodity Exchange hit a low of 2,418 yen per gram before rebounding to 2,427 yen, still 10 yen lower than Monday's close.
Silver was quoted at $13.87/13.97 an ounce, compared with $13.90/14.00 in New York and a 23-year peak of $14.68 hit last month. Prices had surged on hopes that an exchange-traded fund (ETF) will boost demand.
Barclays Global Investors' ETF, called iShares Silver Trust, started trading on the American Stock Exchange on Friday.
Platinum was down at $1,163/1,168 an ounce from 1,167/1,171 in New York and off a record high of $1,169 on Monday. Palladium fell to $375/379 from $379/383.
