LONDON - Gold traded above the key $700 level today, within sight of a 16-month high, as a weaker dollar and bullion’s safe-haven appeal attracted fresh buying.
The metal is closing in on a 26-year high of $730 an ounce hit in May last year and is roughly $145 below its all-time high of $850, fixed in London on January 21, 1980.
"Gold is set to remain strong around $700 as a pivot level. The currencies have enabled gold to take-off and the metal has now uncoupled from currencies.
"We are again running into a self-motivated trend where buying attracts buying," Frederic Panizzutti, metals analyst at MKS Finance, said.
"The move has been impressive and we might see some profit taking, but the market is definitely aiming (for) $720 as the next target. We expect the market to remain volatile in the coming days and would not be surprised to see another rally."
Spot gold touched an intraday peak of $706,60 before paring gains to $703,45/704,05 by 1403 GMT, still up from $699,90/700,70 quoted late in New York on Friday, when it rallied to its highest since mid-May 2006 at $707,10.
Friday’s unexpectedly weaker US non-farm payrolls data dented the dollar, making dollar-priced gold cheaper for holders of other currencies.
The dollar hit a 15-year low against a basket of currencies today as the data, showing companies cut 4 000 jobs last month, stoked expectations for a hefty Federal Reserve rate cut this month.
A crunch in global credit markets stemming from problems in the US subprime, or risky, mortgage sector has forced the world’s major central banks to inject emergency funds into the global financial system to prevent it grinding to a halt.
"Investors are getting more confident that bullion has hit a floor and is on the way back up," said Yuki Sonoda, advisor at Daiichi Commodities. "Finally, a gleam is in sight," he said, adding that a rise in gold held by exchange-traded funds (ETFs) showed steady appetite for gold by funds and other long-term investors.
The latest data showed gold held in New York-listed StreetTRACKS Gold Shares, the world’s largest gold-backed ETF, rose to 549,42 tonnes, another record high, up 33,98 tonnes or 6,6% from the start of the month.
"We would not be short gold here, however, as the chances of a self-fulfilling rally may occur if more options-related buying lifts the spot price through resistance levels, the most important of which is last years high of $730," John Reade, head of metals strategy at UBS Investment Bank, said in a note.
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