Post by
megacopper on Nov 24, 2006 10:31am
Gold rallies as dollar tumbles
Gold rallies as dollar tumbles on growth concerns
By Ciara Linnane, MarketWatch
Last Update: 10:04 AM ET Nov 24, 2006
NEW YORK (MarketWatch) - Gold futures rallied Friday as the dollar tumbled to a one-and-a-half year low against the euro and an almost two year low against the British pound on concerns about flagging economic growth in the U.S.
Gold for December delivery was up $11 at $640 an ounce in electronic trading. The New York Mercantile Exchange is closed for trading Friday, leaving the electronic Chicago Board of Trade contract as only way to trade the precious metal. It's the first time the CBOT contract has been open while Nymex is closed. See Commentary: Friday will be historic day for gold.
On Wednesday, an early rally in gold lost steam heading into the close of trading. The contract ended up just 30 cents at $629 an ounce, well below an intraday high of $635. Trading was closed Thursday for the Thanksgiving holiday.
Early Friday, the euro broke through the $1.30 level for the first time since April 2005 and peaked above $1.31 as a sharp selloff of the dollar continued. The dollar fell to as low as 115.61 yen from 116.27 yen late Thursday. The British pound rose to as high as $1.9351 from $1.9156 late Thursday, its best level since December 2004. See currencies.
'The dollar is taking it on the nose as slow holiday trade in the U.S. is also helping to push gold much higher," said Kevin Kerr, a trader and editor of Global Resources Trader, a newsletter published by MarketWatch, the publisher of this report.
"Gold seems to be building a consensus of buyers at this level and many bullish factors are at work -- the bearish turn for the dollar seems to be even more juice for the gold price," he said.
Jon Nadler, investment analyst at bullion dealers Kitco.com, said the news that Federal Reserve Chairman Ben Bernanke will accompany Treasury Secretary Henry Paulson on a December trip to China may lead some traders to conclude that the day of reckoning for the dollar is approaching.
"Judging by the mood of the dollar and metals in the past few sessions, such a trip appears to shape up as less than a projection of U.S. wishes upon Chinese officials and more of a possible plea to keep the dollar on life support for a little while longer, while some solutions are found to the massive imbalances facing both countries," he said.
Meanwhile, the death toll in Iraq from a series of car bombings in Sadr City, Baghdad's main Shia Muslim district, rose Thursday to 202, the BBC reported. It marks the deadliest day for Iraq since the start of the U.S.-led invasion in 2003.
A car bomb in northern Iraq killed 22 people early Friday, the BBC reported. A Shiite group is threatening to quit Iraq's unity government over security issues, raising fresh concerns about the possibility of achieving any semblance of stability there. The uncertainty provided further support for gold as a safe-haven instrument.
Other metals rallied with gold. Silver futures were up 45 cents at $13.49 an ounce.
Platinum recovered from a steep selloff Wednesday to trade up $36 at $1,190 an ounce. The metal has been volatile this week, gaining on speculation about the launch of a platinum-based exchange-traded fund and then selling off as that speculation faded.
Palladium was up $3 at $329 an ounce. Copper rose 10.9 cents to $3.22 a pound.
Indexes that track companies in the metals and mining sector were all higher. The CBOE Gold Index (GOX :