Source: Marketwatch
San Francisco— Gold and silver futures climbed to heights not seen in more than two decades and copper futures set a record Monday, as investors continued to bet on broad gains against a backdrop of strong energy prices.
"Gold moved closer to the $600 level," said Peter Spina, an analyst at GoldSeek.com, citing several factors as creating the right conditions for further gains — news of gold sales by the European Central Bank, rising energy and commodity prices, and weakness in the U.S. dollar.
Gold futures for June delivery were last trading up $8.20 at $594.90 an ounce on the New York Mercantile Exchange after reaching a 25-year high of $596.80 earlier. The contract closed out the first quarter with a 13% gain, with most analysts expecting it to breach $600 an ounce in the near term.
May silver futures also rose, moving up 22.5 cents to $11.745 an ounce after touching a 22-year high of $11.78.
"Ongoing strength in energy prices is perhaps the most critical element in a continued run in gold prices, but the rise in oil prices can't become so strong that growth is undermined," said Nell Sloane, an analyst at NSFutures.com, in daily commentary.
"In fact, the perfect storm for gold might be steadily rising energy prices and a world economy that is registering just enough growth to keep the threat of higher interest rates in check," she said.
Crude-oil futures rose Monday, with traders concerned about production ahead of the hurricane and summer driving seasons and shrugging off U.S. crude inventories near seven-year highs.
Still, gold "remains an obscure investment product for the vast majority of investors, which means the room to grow remains quite large," said Spina.
"We are still far away from any long-term peak in gold," he said, adding that gold trading for $600 an ounce "will begin to appear inexpensive" within a year.
Also higher, July platinum added $19.60 to $1,090 an ounce, and June palladium traded up $10.70 at $347.50 an ounce.
May copper rose to a record $2.5605 an ounce and traded more recently at $2.557, up 9.4 cents, or 3.8%.
Data released last Friday showed a sharp increase in speculative exposure to the precious-metals markets, with a big increase in funds' net long positions in gold futures, said Kevin Norrish, analyst at Barclays Capital.
"The precious metals have found fresh buying interest early this week after an impressive rally late last week, with gold getting support from buying interest below $580 an ounce," he said in a research note.
Currency play
Meanwhile, Barclays analysts have become more bearish on the dollar and are now expecting the euro to rise to as high as $1.30 in the next 12 months, up from an earlier forecast of $1.26, said Norrish. That scenario would be extremely bullish for gold.
On Monday, the greenback strengthened against the yen but weakened against the euro.
Barclays sees the ECB's announcement that it sold 57 tons of gold and will not sell more for the second year of the gold agreement — which started on Sept. 27, 2005 — as having mixed implications for gold prices.
"It comes as a reminder that amid all rumors of central-bank purchases, the dominant trend among central banks is still selling," Norrish said.
"On the other hand, [the] ECB's decision not to sell any more gold in the remainder of the second year has increased the uncertainty over whether the annual 500-tonne quota would be filled."
On the supply side, inventories of copper were down by 592 short tons as of late Friday, according to Nymex-compiled data.
Gold supplies rose by 49,617 troy ounces, but silver supplies were down by 43,789 troy ounces.
Indexes gain
Meanwhile, indexes tracking stocks in the metals-mining sector headed higher following weakness in the previous session.
The Philadelphia Gold and Silver Index climbed to 144.98, up 2.4%, and the CBOE Gold Index added 2.8% to stand at 146.28. The Amex Gold Bugs Index rose 2.5% to 344.74.
If the Gold Bugs Index closes above its 350 resistance level and reaches a new record, GoldSeek.com's Spina said the benchmark will "look to target the 400 level."
"This looks like a good possibility here if gold closes above $600 and extends its runs," he said.
Among individual metals stocks, shares of Phelps Dodge rose 5% to $84.55 after reaching a 52-week high of $85.15 — finding strength from the rally in copper to all-time highs.
Randgold Resources also reached a one-year high of $19.75 and was last up 7% at $19.51. The company's net profit for 2005 was $40.9 million, more than double that of 2004, "mainly due to a substantial rise in the profit from mining.
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