Gold hits $1000

http://www.reuters.com/article/hotStocksNews/idUST17031920080303?sp=true

Gold ends higher on oil; nears $1,000

Mon Mar 3, 2008 3:52pm EST

By Frank Tang and Daniel Magnowski

NEW YORK/LONDON (Reuters) – Gold edged closer to $1,000 on Monday, setting a record high for the fourth straight day as the dollar tumbled and as crude oil held near an all-time high.

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Silver jumped above $20 an ounce for the first time since November 1980, while platinum and palladium held near highs.

Spot gold jumped as high as $989.30 an ounce and was at $981.20/982.00 at New York’s last quote at 2:15 p.m. EST, up from $973.30/973.75 in New York late on Friday.

Gold has gained around 18 percent in 2008 as investors shift some of their money into the precious metal on expectations of more interest rate cuts in the United States, volatile stock markets and fears of rising energy costs.

"People are bullish because the macro-economic backdrop, especially in the United States, is still deteriorating. There are a lot of incentives in the market for people to actually go long on gold at the moment," said Michael Widmer, metals analyst at Lehman Brothers.

"As long as the dollar remains under pressure, I would expect that gold prices would continue to rise."

The dollar fell to a record low against a basket of currencies on Monday, as concerns about the health of the U.S. economy intensified.

David Rinehimer, director at Citi Futures Perspective in New York, said that widespread investor demand and the weakened dollar — which had a strong inverse relationship to bullion, had boosted commodities and gold.

"The price action of gold has limited any real aggressive selling and prompted hedgers to cover short positions," Rinehimer said.

Record high crude oil prices increased gold’s appeal as a hedge against inflation. U.S. crude futures had reached an all-time peak of $103.95 a barrel. However, crude oil settled at $102.45 a barrel, sharply off its session peak.

Thomas Winmill, portfolio manger who oversees $290 million of assets of Midas Fund MIDSX.O in New York, said that a negative real interest rate environment was prompting investors to keep allocating funds to hard assets such as gold.

In other bullion markets, U.S. gold futures also rallied to a record high of $992 an ounce. The active gold contract for April delivery settled up $9.20 at $984.20 an ounce.

"It clearly needs further weakness in the dollar to do that (reach $1,000), but it doesn’t look inconceivable," said Stephen Briggs, economist at SG Corporate and Investment Banking.

"Gold is heavily overdue a correction. It has for a while, but it just doesn’t do it," Briggs said.

In other metals, silver rose as high as $20.60 an ounce, up from $19.80/19.85 an ounce late in New York on Friday, and was last quoted at $20.29/20.34.

Spot platinum rose to a high of $2,230/2,237 an ounce from $2,163/2,170 late in New York on Friday. It hit a record of $2,230 an ounce on February 22 as problems with power supply disrupted mining in main producer South Africa.

A South African minister said on Friday the country’s mining industry would get priority under measures aimed at cutting electricity use to solve a power crisis.

Palladium rose to $576/580 an ounce, its highest in more than six years, from its previous finish of $563/568 late in New York.

(Additional reporting by Atul Prakash in London and Lewa Pardomuan in Singapore; Editing by Marguerita Choy)

© Reuters 2007.

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