Wednesday, January 02, 2008

Gold Prices Hit 28-Year High

Wednesday, Jan. 2 2008

NEW YORK -- Gold prices topped $860 an ounce Wednesday as a weak U.S. dollar coupled with a record-setting push to $100 oil spurred demand for the precious metal.

Other commodities also climbed, further boosted by an influx of money into the market at the start of the new year.

An ounce of gold for February delivery jumped $23.50 to $861.50 an ounce on the New York Mercantile Exchange after hitting $864.90 earlier in the session. The spike surpassed gold's recent high of $850, but still fell short of its all-time high of $875 an ounce set in 1980.

The surge in oil prices helped boost the price of gold as investors shifted resources to the precious metal, often seen as a safe haven against inflation and political uncertainty.

"I think there's a chance it could hit $890 in the next two weeks," said Tom Pawlicki, a precious metal analyst and energy analyst at Man Financial Inc. "Oil's definitely playing a part."

Before Wednesday's jump, gold ended the year up almost 32 percent.

March silver rose 40 cents to $15.320 an ounce, while copper gained 2.2 cents to $3.0630 a pound.

Oil prices hit $100 a barrel Wednesday for the first time amid perceptions that worldwide demand for oil and petroleum products will outstrip supplies.

The booming economies of China and India have sent energy prices soaring over the past year, while tensions in oil-producing nations such as Nigeria and Iran have worried investors and encouraged speculators to drive prices even higher.

Violence in Nigeria helped nudge crude over the $100 level Wednesday.

Light, sweet crude for January delivery rose $4.02 to $100 a barrel on the New York Mercantile Exchange before retreating to $99.15.

A major driver behind gold's advance from less than $650 an ounce in January has been the dollar's steep drop against the euro. A cheap dollar can make commodities more attractive as an alternative investment, and can also raise demand from foreign buyers as their currencies gain strength.

The U.S. currency fell against the euro Wednesday after a key measure of the U.S. economy's manufacturing strength showed the sector contracted last month after 10 straight months of growth.

The Institute for Supply Management, a private research group, said its manufacturing index registered 47.7 last month, down nearly 3 percentage points from 50.8 in November. A reading above 50 indicates growth; below that indicates contraction.

The euro rose to $1.4730 against the dollar in afternoon New York trading.

Coupled with a weak dollar, new-year index buying further boosted oil and agricultural futures, according to Thomas Willis of Mesirow Financial.

"I would suggest that there has been anticipatory buying prior to today," he said.

Wheat for March delivery on the Chicago Board of Trade rose 29 cents to $9.14 a bushel, while March corn gained 7.75 cents to $4.6325. Oats for March delivery rose 8 cents to $3.1475 a bushel, and March soybeans climbed 34.75 cents to $12.49 a bushel.

Traders were awaiting the afternoon release of minutes from the Federal Reserve's Dec. 11 meeting, when the central bank lowered key interest rates by a quarter point. The minutes could upset investors if they signal the Fed is struggling to balance worries about inflation and slowing growth.

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