Gold Rises Above $350 an Ounce on Weaker Dollar, World Tension
By Mark Jaffe
>>``It's starting to look as if this market has legs,'' McGhee said, predicting prices may rise as high as $365 an ounce in the next few days.<<
New York, Jan. 3 (Bloomberg) -- Gold futures rose, closing above $350 an ounce for the first time since 1997, as a weakening dollar and military tensions in the Middle East and Asia made the metal a more attractive haven to investors.
``The euro, the yen, the Swiss franc are all moving higher, and the political worries are out there,'' said Marty McNeill, a gold trader at R.F. Lafferty & Co. in New York. ``These things won't go away.''
Gold prices have risen 9.5 percent in the past month as threats of a U.S. attack against Iraq and concern that North Korea has resumed development of nuclear arms increased demand for the metal. The weaker dollar has made dollar-priced gold cheaper for buyers using other currencies.
Gold for February delivery rose $5.10, or 1.5 percent, to $351.60 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most-active contract since April 1997.
The 26 percent rise in gold futures in the past year was prompted partly by falling stock prices, which increased demand for the metal as an alternative investment. Gold had languished during the earlier surge in stocks, with prices sinking to a 20- year low of $253.20 an ounce in July 1999.
The dollar fell for the seventh time in eight sessions against the euro and weakened against the yen, contributing to today's gain for gold, traders said.
Speculators bought gold futures ``anticipating the market will go higher,'' said Frank McGhee, head trader at Alliance Financial LLC, a gold-trading company in Chicago.
Market `Has Legs'
``It's starting to look as if this market has legs,'' McGhee said, predicting prices may rise as high as $365 an ounce in the next few days.
Hedge funds and other large speculators as of Dec. 24 had bought 57,105 more gold futures contracts than they had sold, the largest ``net-long'' position since February 1996, a report last week from the U.S. Commodity Futures Trading Commission showed.
Gold-mining shares also rose. The Philadelphia Gold & Silver Index of 11 mining companies gained 1.69 to 79.51.
Shares of Denver-based Newmont Mining Corp., the world's biggest gold producer, rose 42 cents, or 1.4 percent, to $30.12, a seven-month high.
U.S. President George W. Bush accused Iraqi President Saddam Hussein of holding the United Nations Security Council ``in contempt'' for failing to prove his country is free of weapons of mass destruction.
More Troops
Bush has threatened military action against Iraq to force it to disarm. The U.S. has about 40,000 Army troops in the Persian Gulf, and the Pentagon this week ordered the entire 3rd Infantry Division to the region.
``More important then what Bush said is what he did this week, mobilize more troops,'' said Leonard Kaplan, president of Prospector Asset Management, a money-management company in Evanston, Illinois. ``That's what the market is responding to.''
North Korea called for diplomacy to settle its dispute with the U.S. over its nuclear-arms program. North Korea which acknowledged in October that it was violating a 1994 disarmament accord with the U.S., last month expelled UN inspectors monitoring its nuclear program.
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