Source: Marketwatch
San Francisco— Gold futures rallied to another multidecade high of nearly $730 an ounce, silver climbed to levels not seen in a quarter century, and copper and platinum set records Thursday as traders bet on longer-term weakness in the U.S. dollar and strong global demand for metals.
"A global readjustment is taking place and the short of it is — the U.S. dollar is losing its dominance," said Peter Spina, chief investment strategist at GoldSeek.com.
"Clearly, the shift from the U.S. dollar is accelerating," he said. "Combine this with other driving factors in the gold market, [and] you have the recipe for much higher prices."
Gold for June delivery climbed as high as $728 an ounce on the New York Mercantile Exchange — an intraday level futures prices haven't seen since September 1980, according to monthly charts from Thomson Financial. The contract was last up $15.60, or 2.2%, at $721.30 an ounce.
July silver touched $15.20 an ounce, the loftiest futures level since early 1981. It was last up 53 cents, or 3.7%, at $14.81.
On Wednesday, gold spiked after the Federal Reserve raised rates as expected and said it may raise again if needed to cool the economy and keep inflation in check.
"Contrary to expectations (as well as to past patterns), the dollar eroded further and gold gained even more ground, right after the FOMC interest rate hike," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"The precious-metals market is sensing something here that is starting to feel inflationary, volatile, and full of future problems for the dollar," he said.
The dollar recently touched a multi-month low, but the greenback gained ground Thursday as surging commodities prices stoked inflation fears, offsetting a less-than-expected rise in U.S. retail sales data. See Currencies.
Gold has surged this year, partly because of inflation fears, dollar weakness and worry about developments in the Middle East. But the metal has broken out of its traditional role as a safe-haven instrument and taken on a momentum of its own as a new asset class, attracting strong demand from a wide range of investors.
"Market participants are now starting to talk about the January 1980 peak of $850 as a viable target, which would require another 20% appreciation in gold from the current high," economists at research firm Action Economics said in an early Thursday note to clients.
At $725, "there's now more risk than reward in the near term," warned Peter Grandich, editor of the Grandich Letter.
"Eventually the old highs around $875 should be taken out, but we're now getting severe overbought signals that can't be discarded," he said.
Uncertainty lingers
On the geopolitical front, the head of the United Nations International Atomic Energy Agency, Mohammed El Baradei, said he welcomes the Security Council's decision to hold off imposing any sanctions on Iran over its nuclear program, the BBC reported.
The U.S. earlier this week agreed to a delay in imposing sanctions to allow European diplomats time to explore other options in resolving the situation.
"It is very good that the [U.N.] Security Council holds its horses," El Baradei said at a news conference in Amsterdam, according to the BBC.
"I am very optimistic, I hope both sides will move away from the war of words, I hope the pitch will go down. … we need compromises on both sides," he said.
Iran has rejected demands from the U.N. to halt its nuclear research, claiming it is aiming solely to generate electricity for civilian purposes and not to develop nuclear weapons, as the West fears.
"A major rift is shaping up between the U.S. and Russia and China as to how to deal with the Iranian threat," said Nadler. "This is precisely the type of uncertainty and tension that is shaping today's bullion markets."
"In addition, the metals market is also digesting the recently noticed (disturbing to some) trend of nationalization of resources in some Latin and South American countries," he said, adding that "these policies and their impact, have investors worried about the future of metals."
Other metals rallied along with gold and silver. July platinum set a new high at $1,299.50 an ounce and was last up $27.30, or 2.2%, at $1,287. June palladium climbed $9.80 to $400 an ounce after a high of $401.10 — a level not seen since 2002.
July copper set a record at $4.04 a pound and was last up 23.2 cents, or 6.3%, at $3.92 an ounce.
On the supply side, gold inventories rose 49,460 troy ounces to 7.67 million as of late Wednesday, according to Nymex data. Silver supplies fell 85,600 troy ounces to 123.5 million.
Copper fell 315 short tons to 14,250 short tons.
Indexes at all-time highs
The broad rally among the metals futures drove three major benchmarks that track the sector to never-before-seen levels
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