Source: Marketwatch
San Francisco— Gold futures closed above $600 an ounce Monday for the first time since December 1980, joining a broader commodities rally on talk of a possible U.S. attack on Iranian nuclear facilities.
"The saber rattling (albeit strongly watered down in the past few hours) coming from the White House and the wayward chatter coming out of Tehran once again clashed on the world political scene," said Jon Nadler, an analyst at Kitco.com.
That left "many to wonder as to when, not if, a preemptive attack on the country's nuclear-facilities-in-the-making would take place," he added. So "gold will continue to do what it must do to reflect the world's realities and the demands placed upon it by apprehensive buyers small and large alike."
"The critics are left scratching their heads, as who is to say whether — in retrospect — $600 will come to be regarded as having been 'just the beginning,'" Nadler said.
Gold for June delivery climbed as high as $602.80 an ounce, the highest intraday futures level on the New York Mercantile Exchange since January 1981. The contract closed up $9.10 at $601.80 an ounce to mark the highest session-end price for futures since December 1980.
The New Yorker magazine reported that the United States is stepping up preparations for a possible air attack on Iranian nuclear facilities, which may involve the use of nuclear weapons against underground sites.
Dismissing talk, fueling rally
President Bush said that the news reports over the weekend were merely "wild speculation."
"The characterizations of 'wild speculation' notwithstanding … the focus on what may or may not be done regarding the Iranian impasse weighed heavily on trader's minds as they closed out Monday's gold trading," Nadler pointed out.
Dan Bartlett, senior adviser to the president, said that the New Yorker report is "ill-informed," the BBC reported. Bartlett reiterated that the government is committed to a diplomatic solution to the issue of Iran's nuclear program.
U.K. Foreign Secretary Jack Straw also dismissed the New Yorker report, according to the BBC.
The U.N. Security Council has ordered Iran to stop enriching uranium but Tehran has refused, insisting its research is aimed at generating electricity for purely civilian use.
"The fear factor related to Iran is real, and an attack of some type is likely imminent from the Bush administration," said Kevin Kerr, editor of Global Resources Trader, a newsletter published by MarketWatch, the publisher of this report.
"The attack could be devastating to the remaining tattered relations between the Middle East and the United States," Kerr added.
Against this backdrop, "apparently the funds are aggressively looking for opportunities in markets other than oil, and the gold market is apparently going to be a benefactor of an ongoing wave of investment interest," said Nell Sloane, an analyst at NSFutures.com, in daily commentary.
'Petrodollars'
Frank Holmes, chief executive of U.S. Global Investors, which manages the Gold Shares Fund, said that he believes the main support for gold at the moment is coming from the recycling of petrodollars.
"If you look at countries with massive dollar buildup from selling oil, they're diversifying into gold," he asserted.
Against this backdrop, oil futures climbed to their highest level since Feb. 1.
"There's a lot of noise [about Iran], but the more important fact is economics," said Holmes.
Meanwhile, an influential Chinese economist said that China should promote yuan reform, allow companies to hold more foreign currency and raise gold reserves, according to Felicity Algate, economist at Bear Stearns.
Xia Bin, the head of the financial-research institute at the cabinet's Development Research Center, said that about $700 billion in forex reserves was ideal.
China held $853.6 billion in reserves at the end of February, the highest of any country in the world.
"As Iran returns as a focal point for investors, aided by talk of Chinese increase in gold holdings, [that] should keep a flame under gold this week," said Peter Spina, an analyst at GoldSeek.com.
Silver leads the charge higher
Other metals futures also closed sharply higher, with May silver posting the biggest percentage gain among the metals, closing up 49 cents, or 4.1%, at $12.56 an ounce following a new 22-year high of $12.61 an ounce.
Silver and the base metals have led the charge higher among the metals.
"The speculative fever is still raging; it just seems to be just temporarily ignoring gold," said Brien Lundin, editor of Gold Newsletter. But at some point, "speculators will begin cashing in their newly won chips across the commodities spectrum and we'll see a pullback lasting until late summer."
Many analysts have been warning of a "buy the rumor, se
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