Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : The Hot Button Questions:- Money, Banks, & the Economy -- Ignore unavailable to you. Want to Upgrade?

To: maceng2 who wrote (219)	12/13/2002 7:42:54 AM
From: maceng2	Read Replies (1) \| Respond to of 1417

Gold reaches 3-year high as investor fears grow By Jennifer Hughes and Nerma Jelacic in London Published: December 13 2002 12:16 \| Last Updated: December 13 2002 12:16 The gold price rose to a three-year high on Friday, helped by fresh concerns over geopolitical stability which sent investors into so-called safe-haven assets. Nervousness also helped oil to a two-month high and pushed the dollar to its lowest level in nearly three years against the euro. Investors rushed for perceived safe-haven instruments following news North Korea was planning to reactivate a nuclear plant and reports that Al Qaeda may have obtained nerve gas from Iraq. Moreover, the New York Times reported US officials preliminary conclusions on Iraq's weapons declaration suggested the report has significant gaps in its account of Iraq's chemical and biological agents. The gold price jumped to $335.25 a troy ounce in London trading on Friday, up from $331.2 in New York on Thursday. Analysts said there were underlying factors too which supported the price rise. "This is at least partly due to a growth/inflation trade-off," said Hans Redeker, head of currency strategy at BNP Paribas, who said investors were preparing for the possibility of lower growth and higher inflation - which would depreciate their assets more quickly - in the years ahead. "This makes gold a more interesting investment," he added. The euro rose to a 34-month high against the dollar at $1.0259, comfortably clearing its previous July high before easing to $1.023. "What we are seeing today is the classic reaction of the markets this year to heightened geopolitical risk - the move into currencies with current account surpluses and the search for yield," said Kamal Sharma, strategist at Commerzbank. Mr Sharma said the dollar's sudden weakness was a combination of the perceived risk to the US of global instability and a reflection of the US current account deficit. Countries with deficits are more at risk of sudden currency weakness if the inflows needed to sustain the deficit - well over $1bn a day in the dollar's case - were to suddenly fall off. Instead, so-called safe-haven currencies such as the Swiss franc, the Japanese yen and the Norwegian krone, all gained. All three have current account surpluses, suggesting the exchange rate is less likely to suddenly depreciate. The dollar fell to a five-year low at NKr7.14 against the krone and a five-month low against the Swiss franc at SFr1.439. Swiss officials are known to be worried at the strength of the franc and central bank chairman Jean-Pierre Roth on Friday warned the bank stood ready to intervene if it thought it necessary. Crude prices reached a two-month high, buoyed by OPEC's pact to cut overproduction, ongoing strike in Venezuela as well as the continuing tensions in Iraq. January Brent crude price was up 41 cents at $27.28 per barrel in late morning trade in London, off the $27.74 high it hit earlier in the day. At a meeting in Vienna on Thursday OPEC ministers to raise quotas while simultaneously curtailing overproduction. The group said it would aim to cut output by 1.5m to 1.7m barrels per day and reduce cheating to a minimum. "The core Gulf countries seem likely to comply, although three has never been such a thing as a 100 per cent compliance, even by Saudi Arabia," said Lawrence Eagles commodities broker at GNI Research. Mr Eagles said he was cynical that Algeria, Nigeria, Venezuela and Libya would comply, but that at worse this meant OPEC output should fall by around 900,000 barrels per day over November levels. "If the renegades can be persuaded then the output cut could be much greater," he added. Oil prices were also buoyed by the general strike in Venezuela, which had significantly reduced exports from the world's fifth largest oil exporter. The strike led the US Energy Department to announce on Thursday it could lend crude from the Strategic Petroleum Reserve to US oil companies whose refineries were suffering a shortage of supplies from Venezuela. news.ft.com