Daily Gold Update

Source: Reuters

New York— Gold futures climbed and held near a 23-year peak on Friday as inflation worries, bullish market fundamentals and strong interest in commodities boosted the price further above $500 an ounce, dealers said.

Gold's rally helped push all precious metals futures to life-of-contract highs, although they stood below those peaks by midmorning.

Silver hit its highest level in 18 years, while platinum was back above $1,000 an ounce and near a 26-year peak.

"Gold has become very popular. The $500 level is a big signpost," said a New York broker at a futures commission merchant.

"There are a lot of concerns about inflation. There has been some good buying in Japan and there is obviously good buying elsewhere."

At the COMEX division of the New York Mercantile Exchange, February delivery gold rose $1.20 to $507.50 an ounce by 11:15 a.m. EST, moving between $503.80 and $510.80 — the highest price for benchmark futures since February 1983.

Buying from Asia to Europe to New York was driving gold higher, trading sources said, but prices should be volatile in the near term as it could be near to technically overbought territory.

"Gold has performed well this week, certainly, given the market expectation of a correction early in the month," said Paul McLeod, vice president of precious metals at Commerzbank in New York.

"On the supply side, everything is very stable, so it is the demand side that is driving things," he said.

But he added: "We seem to be at the upper end of an up-trend channel right now, so I don't expect it to have a whole lot more follow-through in the near term."

However, some dealers believe gold has plenty of room to rise into next year, and a few have called for it to surpass bullion's high above $850, touched in 1980, on strength from a host of economic factors.

Analysts have said that central banks in Russia, Argentina and South Africa are open to boosting their gold reserves, and newspaper reports indicated that Asian countries may soon join them is adding the metal to holdings.

Bullion spiked to $506.50 Friday, a high last seen in February 1983, before retreating a bit.

Spot gold fetched $502.60/503.40, compared with Thursday close at $503.00/3.75. Friday's afternoon fix in London was $502.50.

Departing Federal Reserve chief Alan Greenspan renewed a warning on U.S. budget deficits on Friday, saying that good short-term prospects for the U.S. economy should not distract from huge looming fiscal strains that pose "significant" economic risks.

Separately, the U.S. job market sprung back last month from a hurricane-induced slowdown as nonfarm employers added 215,000 workers, a government report showed.

Meanwhile, the European Central Bank made its first interest rate increase in five years, raising benchmark rates by a quarter percentage point to 2.25 percent, but it said it would not rush into further hikes.

March silver futures rose 3.3 cents to $8.635 an ounce, trading from $8.545 to $8.72 — futures' loftiest level since August 1987. A move above $8.90 would take silver to its loftiest since May of that year, when it hit $9.50.

Spot silver was flat at $8.51/53 an ounce. The fix was at $8.535.

NYMEX January platinum surged $11.30 to $1,006 an ounce, near a fresh high of $1,012 — its best price since March 1980. Spot platinum rose to $998/1002.

March palladium was up $3.60 at $272 an ounce. The session peak of $275 was a 19-month high. Spot palladium rose to $264/268.