Gold hits 25-year high as investors seek cover
April 19, 2006
Tokyo - Gold in Asia rose to the highest level in more than 25 years as record oil prices prompted some investors to buy bullion as a hedge against inflation. A decline in the dollar also boosted the precious metal's appeal as a haven.
Bullion for immediate delivery has jumped 21 percent this year as oil climbed to a record $71.60 a barrel. The dollar is down 3.4 percent against a basket of six major currencies.
"Rising oil prices are the main driver," said Kim Yoon Seung, a dealer at Samsung Futures in Seoul, by phone on Wednesday.
"Higher oil makes stock markets nervous and creates inflation concerns, leading to investment in gold."
Gold for immediate delivery rose as much as $3.73, or 0.6 percent, to $624.80 an ounce, the highest since December 1980. The metal has risen 44 percent in the past year and traded at $623.55 an ounce at 4.44pm Singapore time. Futures prices reached $873 an ounce in 1980 after oil more than doubled, sparking a surge in inflation.
Bullion for delivery in June rose as much as $4.80, or 0.8 percent, to $628.10 an ounce on the Comex division of the New York Mercantile Exchange.
Mounting tensions over Iran's nuclear program pushed oil prices to a record yesterday. Iran is the world's fourth-largest producer of crude oil.
President George W. Bush said yesterday the US would consider all options, including a nuclear strike, to prevent Iran from developing atomic weapons. He stressed diplomacy remains his first choice.
Iran said in January it would resume nuclear research and announced last week it had enriched uranium sufficiently to produce nuclear fuel.
Gold's rise this year "is confirmation of fears of geopolitical events," said John Licata, chief investment strategist at Blue Phoenix, an energy and precious metals consulting firm in New York.
"A lot of people are worried there's going to be a military strike and that's given gold a flight to safety quality."
Jim Rogers, the former George Soros partner who foresaw the start of a commodity rally in 1999, said in an interview April 17 that the boom in energy and raw material prices will endure, driving gold to a record $1 000 an ounce.
"The shortest bull market for commodities lasted 15 years, the longest 23 years," Rogers said. So if history is any guide, "they've got a long way to go". - Bloomberg
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