Daily Gold Update

Source: Reuters

London— Gold hit fresh 18-year peaks on Friday as buying picked up in Japan after a holiday, but traders may have to wait until next week to take out the $500 an ounce target when U.S. markets reopen.

Gold peaked at $496.75 a troy ounce in early trade, its firmest since December 15, 1987. By 1513 GMT, it was quoted at $495.50/496.30 an ounce, up from the previous day's late quoted $493.10/493.90.

Most dealers expected the metal to stall just below $500. U.S. markets, closed on Thursday and Friday for the Thanksgiving holidays, are due to reopen on Monday.

"The funds are still happy to play around at these levels," said Darren Heathcote, head of trading at N M Rothschild in Sydney. "They expect us to look to test the upside a little bit but I don't necessarily at this stage think we are going to do $500."

Few doubted the metal would fail to test this psychologically important level soon, as more and more investors diversify into precious metals amid worries about inflation and geopolitics.

"The $500 level continues to look achievable soon, but we think this has become more of a self-fulfilling prophecy," Ingrid Sternby of Barclays Capital said.

A breach of that level could trigger some profit-taking by investors who bought into the rally early on, but gold could spend a longer time above $500 this time round.

In December 1987, bullion held above $500 for just one day, while in early February 1983 it managed a few attempts, peaking at $509 before subsiding to around $340 by the end of that year.

The higher prices levels have nevertheless taken their toll on key Asian consumption, with holders of the metal dishoarding gold bars, jewelry and scrap.

Jewelry shops in India, the world's top gold consumer, were reported to be sitting on piles of unsold stocks. Imports into Ajhmedabad, a leading bullion importing center in western India, have fallen to about 150 kg a day compared with 1,200 kg usually sold at this time of the year — an auspicious period for marriages.

Other precious metals were firm, with platinum group metals aided by gains in Japanese futures.

Platinum rose to $986/990 an ounce from $977/980 late in London, tracking fund buying in Tokyo platinum futures.

Sister metal palladium rose to $257/261 an ounce from $254/257 late in London.

Silver rose to $8.18/8.20 an ounce from $8.14/8.16.