Gold, precious metals soar as dollar weakens
Jan Harvey
22 September 2008
LONDON (Reuters)
Gold soared more than 2 percent on Monday as the dollar weakened and
fears spread that a $700 billion U.S. plan to stabilise the financial sector
may not be enough to avert further trouble ahead.
"What you're really seeing is a loss of confidence in the dollar," Tom
Hartman, a trader at Altavest Worldwide Trading said.
"These extraordinary moves by the Federal government are really quite
overwhelming to a lot of investors," he added. "We are seeing a very strong
flight to quality."
Spot gold traded at $890.20/892.20 an ounce at 1427 GMT, up from $871.15 an
ounce at the nominal New York close on Friday. Earlier it touched a session
high of $894.10.
Silver tracked gold higher, rising 6.5 percent to a high of $13.37 an ounce
before settling back to trade at $13.29/13.37, against $12.55 at the nominal
New York close last session.
The dollar weakened broadly as the U.S. government's plan to bail out the
troubled financial sector raised new concerns over the country's budget
deficit.
The U.S. currency fell nearly 1 percent to a three-week low against the euro
as traders worried about the financial crisis.
Investors are awaiting details of the plan, aimed at mopping up toxic
mortgage debt. Uncertainty over the project is boosting gold's appeal as a
haven from risk.
"While the U.S. Treasury's rescue package may be enough to calm some of the
froth in the U.S. and global financial markets, the collapse, or
near-collapse, of two major institutions and the domino effect this had on
the financial sector may again draw more investor diversification towards
gold as a safe-haven asset," said James Moore, an analyst at
TheBullionDesk.com.
HAVEN FROM RISK
Gold is benefiting from renewed interest in bullion as a haven from risk
because jitters in the financial system spook investors. Equities posted
heavy losses last week, fuelling a near 15 percent rise in the price of
gold.
Stock markets weakened again on Monday, with the U.S. equities falling more
than 1 percent on fears over the government's rescue plan. European shares
also slipped.
Investor demand for gold is firm. The world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust, said its gold holdings
rose 24.5 tonnes or 3.7 percent on Sept 19.
The trust's gold holdings have risen nearly 11 percent from a week ago.
Among other precious metals, platinum and palladium were also strong,
supported by a weak dollar and firm gold, and as traders speculated the
metals' recent losses may have been overdone.
Platinum is down 18 percent and palladium down 15 percent from a month ago.
Platinum rose more than 6 percent on Monday, while palladium soared more
than 8 percent.
"Some buying into the market is to be expected," said Standard Bank analyst
Walter de Wet. "If platinum falls below $1,050, some of the producers start
looking at the longer term viability of the PGMs."
"Of course, as the dollar weakens it is supportive," he added.
Spot platinum was at $1,208/1,228 an ounce against $1,134.50 at the nominal
New York close on Friday, while palladium was at $251.50/259.50, from $231
on Friday.
From http://africa.reuters.com