Daily Gold Update

Source: Marketwatch.com

San Francisco— Gold futures surged as much as $14 an ounce Monday, gaining for an eighth-consecutive session amid fresh reports of investment demand in Asia and the Middle East.

"Incessant demand for gold from speculators and investors alike continues to swell metal prices with the entire complex pushing on to fresh highs … extending the gains made Friday," said James Moore, an analyst at TheBullionDesk.com, in a note to clients.

Gold for February delivery climbed to a high of $544.540 an ounce in overnight trading, a level not seen in the futures market since April 1981. The contract was last at $538.60, up $8.40 on the New York Mercantile Exchange.

The contract has added around $34 since the beginning of December and is up 19% for the year to date, driven by strong physical demand, central bank buying and inflation concerns.

"This is the eighth-consecutive trading day that a new major trend high has been logged and the fifth straight day when the magnitude of gains has increased," said economists at Action Economics, who cited reports of strong investment fund demand for the metal in Japan, India, China and the Middle East.

Peter Grandich, editor of the The Grandich Letter, said Monday's surge can also be attributed to short-covering by investors.

"While the inevitable profit-taking will surely arrive, players who don't accept the belief that this group existed will continue to scratch their heads trying to explain gold's explosion to the upside," he said.

Gold has two multidecade resistance areas going back to 1981 — the $540 area that the contract is currently trading at and the old highs of $850 an ounce, said Grandich.

Also Monday, Bear Stearns analyst Michael Dudas raised his 2006-2007 average gold price forecast to $510 and $525 an ounce from $465 and $475.

"Continued monetary accommodation as evidenced by low real interest rates witnessed in the U.S., Europe and Japan will be better reflected in current and futures gold prices," he said in a research note, emphasizing that Bear Stearns expects a "continuation of the global commodity price rally we have been enjoying since 2002.

Other metals also rallied. Silver for March delivery was up 6 cents at $9.155 an ounce after trading as high as $9.28, the loftiest futures price since May 1987.

January platinum added $14.10 to $1,021 an ounce to trade at level not seen since March 1980, and sister metal palladium saw its March contract climb $14.45 to $301 an ounce after a $305 high.

Copper was the lone loser, down 2.4 cents at $2.006 a pound.

On the supply side, inventories of copper were unchanged at 3,681 short tons as of late Friday, according to Nymex. Silver supplies were up 564,000 troy ounces at 118.8 million troy ounces and gold was down 1,299 ounces at 6.679 million troy ounces.