Gold was little changed in Asia yesterday after breaching US$1,000 for the first time as investors turned cautious, gauging the extent of a US economic slowdown and prospects for a prolonged global credit crisis.
Gold futures climbed as high as US$1,000.45 an ounce on Thursday as mounting credit-market losses spurred demand for bullion as a haven from the sagging dollar and equities. Gold is up 37 percent since the US Federal Reserve began cutting borrowing costs in September, sending the dollar tumbling.
"Gold strength has been mainly driven by the weak dollar, strong crude and increasing fear of recession," Stephan Schlatter, executive director for metals markets in Asia at UBS AG, said from Singapore yesterday by e-mail.
PHOTO: AP
"Assuming that the situation will not change over the next few weeks there is still a high probability that gold will show continuing strength," he said.
Gold for immediate delivery was little changed at US$996.49 an ounce at 2:49pm in Singapore. Silver gained 0.9 percent to US$20.69 an ounce, compared with US$21.23 on March 6, the highest since 1980.
The US Federal Open Market Committee's next regular meeting is on Tuesday. Traders expect the Fed to lower its benchmark rate by 0.75 percentage point to 2.25 percent based on futures prices.
"Gold might still go higher to US$1,100 or succumb to some profit-taking, depending on the extent of the interest-rate cut and whether the subprime crisis has come to an end," Ng Cheng Thye, head of precious metals markets at Standard Bank Asia, said by phone from Singapore.
Gold futures for April delivery gained US$4.60, or 0.5 percent, to US$998.40 an ounce on the Comex division of the New York Mercantile Exchange. The price reached US$1,001.50 on Thursday, the highest ever for a most-active contract.
Gold's all-time inflation adjusted record is US$2,284 on Jan. 21, 1980, according to a calculator on the Web site of the Federal Reserve Bank of Minneapolis.
The metal jumped 31 percent last year as the dollar fell 9.5 percent against the euro.
The dollar headed for a fifth straight week of declines against the euro and the fourth week of losses versus the yen.
The US currency traded at US$1.5615 per euro at 2:41pm in Singapore, after touching US$1.5645 per euro on Thursday, the weakest since the European currency's debut in 1999. It traded at ?100.35, after touching ?99.77 on Thursday, the lowest since 1995.
Rising prices for precious metals such as gold and silver may deter buying from the end users such as jewelers, Ng said.
"Precious metals, especially silver, see big discounts in the spot market which is a sign of weak physical demand," he said.
The recent gains were "on the back of speculation only," Schlatter said.
"When attacking again the magic US$1,000 hurdle, the risk of seeing profit-taking on speculative positions is increasing," he said.
Gold demand in the January-March quarter will decline from a year earlier as record prices curb purchases, the World Gold Council said earlier this week.
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