Gold jumped to a record above US$1,200 an ounce in New York as declines in the dollar and higher commodity prices spurred investor demand for the precious metal as an inflation hedge.
Gold rose for the 11th time in 12 sessions as the U.S. Dollar Index fell after China's manufacturing grew at the fastest pace in five years. The Standard & Poor's GSCI index of 24 commodities rose to a one-week high, led by cocoa, energy and silver. Morgan Stanley and BlackRock Advisors LLC increased their gold assets in the third quarter, U.S. filings show.
"There's investment demand for gold from everywhere," said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. "The dollar has pushed gold to new highs. Gold is in an uptrend, and there's no sign whatsoever that the trend will stop at this point."
Gold futures for February delivery rose US$12.10, or 1%, to US$1,194.40 an ounce at 10:47 a.m. on the New York Mercantile Exchange's Comex division, after earlier touching a record US$1,200.50. Gold for immediate delivery climbed to a record US$1,199.43 an ounce.
Gold futures have advanced 35% this year, more than the MSCI World Index of shares and U.S. Treasuries. The precious metal is heading for its biggest annual gain since 1979.
Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased to about 1,130 tonnes Monday, the highest since June 24, according to data on the company's Web site. The fund's holdings were at a record 1,134.03 tonnes on June 1.
"Gold has made all-time highs versus major currencies like the euro, Swiss franc and pound," said Mario Innecco, a broker at MF Global Ltd. in London. "People want to get rid of paper and buy a currency that can't be deflated. That's gold."
Gold traded in euros, pounds and Swiss francs climbed to all-time highs on Nov. 27.
"Gold is the international currency," FuturePath's Lesh said.
Morgan Stanley's SPDR holdings increased 3.5 million shares to 6.47 million shares by Sept. 30, according to data on Bloomberg. BlackRock's holdings increased 5.9 million shares to 6.39 million shares. Soros Fund Management LLC also bought shares in the period.
The Federal Reserve has kept benchmark interest rates near zero since December in a bid to revive lending after the worst financial crisis since World War II. The U.S. government has boosted spending to combat the recession.
"With interest rates so low and a climbing deficit, there's real fear that inflation will be a salient problem," said Michael Pento, the chief economist at Delta Global Advisors. In January, when gold slipped below US$850, Mr. Pento predicted gold would reach US$1,200 by year-end. "It's hard to make a bearish case for gold right now," he said on Nov. 25.
Demand for bullion also has increased among governments. Central banks in India and Mauritius bought the metal from the International Monetary Fund. China and Russia also added to their holdings.
Concern over Iran's nuclear program also may boost the appeal of gold, Michael Guido, the director of hedge-fund sales at Macquarie Capital USA Inc. in New York, said in a note Monday.
The U.K. government said Iran is holding five Britons after their yacht possibly strayed into Iranian waters in the Persian Gulf last week.
The incident comes as the U.S., Britain and their European allies condemn Iran's plan to expand its nuclear program in defiance of United Nations sanctions. Some investors buy gold as a haven in times of geopolitical tension.
Hedge Funds
Hedge-fund managers, large speculators and index funds increased their net-long position, or bets on higher New York gold futures, to the highest level since at least 1993, according to a report yesterday from the U.S. Commodity Futures Trading Commission.
The net-long position was 262,331 contracts as of Nov. 24, up 11% from a week earlier, according to the report.
Among other precious metals, silver for March delivery climbed 1.7% to US$18.835 an ounce on the Comex. Platinum for January delivery climbed 1.4% to US$1,480 an ounce. Palladium for March delivery jumped as much as 5% to US$384.65 an ounce, the highest price for a most-active contract since July 31, 2008.
The Philadelphia Gold & Silver Index of 16 mining companies rose 4.4%, heading for the biggest gain since Nov. 3, led by Silver Standard Resources Inc. and Barrick Gold Corp., the world's largest gold producer.
Bloomberg.com
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