Gold hits new 25-year peak, trades just below $700 ($698)

Reuters -- FX Street ^ | May 9, 2006 | Atul Prakash

[DebtAndDelusion]

Gold rallied to a new 25-year high near $700 an ounce on Tuesday on dollar weakness, while platinum set a new record on strong industrial demand and fund buying.

Other precious metals also gained from the bullish environment in commodities, which saw copper setting a new record and aluminium surging to an 18-year peak.

"We have a combination of overlaying sets of momentum here. More and more of genuine investors have become convinced that some portion of their assets should be put into the sector," said Sean Corrigan, chief investment strategist at Diapason Commodities Management.

"Clearly this is a very nervous market and we could suffer quite a serious shake out at any point."

Spot gold jumped as high as $697.00 an ounce, up 2.8 percent from $677.90/678.90 late in New York on Monday, before easing to $695.60/696.60 in later afternoon trade. It soared to an all-time high of $850 in 1980.

The dollar fell to a new eight-month low against the yen, making gold cheaper for holders of other currencies. Investors tend to put their money into commodities after a drop in other financial markets.

"It's a bullish picture across the commodities sector. The market will continue to move higher. The upside is still open," a precious metals trader in London said.

Dealers said gold was also supported by political tensions over Iran's nuclear ambitions, inflation worries and talk about China's gold reserves.

Some Chinese economists urged Beijing to quadruple its gold reserves to 2,500 tonnes from 600 tonnes because the country's foreign exchange reserves had become the world's largest, an official industry newspaper reported on Tuesday.[ID:nPEK286687]

"Gold will continue to be seen as a safe bet as international tension look set to increase again while the dollar is set to remain under pressure," said James Moore, analyst at TheBullionDesk.com.

The market shrugged off news that gold reserves held by Eurosystem central banks fell by a net 916 mln euros in the week ended May 5 after three central banks sold bullion.

The sale was consistent with the Central Bank Gold Agreement of 2004.

PLATINIUM LEAPS

Platinum prices gained $45, or 3.8 percent, to reach $1,231/1,236, compared with $1,186/1,191 late in New York on Monday. The metal has jumped 28 percent this year along with other precious metals.

The rise by platinum was driven by robust demand for the metal from industries such as automobiles, glass and chemicals, Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus, said.

"The market seems well supported. In the long run this is going to change, but for the time being it's not the moment to fight the bulls," he said.

Platinum's major industrial use is in autocatalysts, particularly in diesel vehicles, as it helps cleanse environmentally damaging fumes from engine exhausts.

"We believe that platinum has a more fundamental underpin than gold, silver or palladium," said John Reade, precious metals analyst at UBS Investment Bank.

"While there is undoubtedly investor and speculative long positions in platinum, the market remains in a fundamental deficit and should remain so for the foreseeable future," he said in a daily report.

Investors were betting on platinum ahead of London's Platinum Week, which starts on May 15. Johnson Matthey , the world's top distributer of the metal, will release its widely read report during the week on market fundamentals and price trends.

In other precious metals, silver rose to $14.21/14.31 an ounce from $13.78/13.88 in New York. Palladium rose as high as $390 an ounce, the highest since February 2002, and was at $389/387, versus $370/375 in the U.S. market. (Additional reporting by Lewa Pardomuan in Singapore)

[DebtAndDelusion]

Gold and silver exploding today. Meanwhile the government just keeps printing more and more money and then the people wonder why prices are going up. Someday they will figure it out and when they do they will be some kind of unhappy.

Gold going to the moon. If you haven't figured it out don't worry -- soon enough you won't be able to ignore it. After all, if you are going to ride the Titanic, you might as well go First Class.

HG

[E. Pluribus Unum]

I'd love to see a chart that tracks gasoline and gold prices in parallel.

[onyx]

	VIENNA PHILHARMONIC	703.00	719.30	702.50	717.30	17.80
	GOLD MAPLE LEAF	704.60	721.00	704.10	718.90	17.80
	GOLD AMERICAN EAGLE	706.70	723.60	706.10	721.60	18.50
	KRUGERRAND	694.10	709.80	693.60	707.80	17.30
	PLATINUM MAPLE LEAF	1,246.60	1,262.90	1,246.60	1,261.90	40.70
	PLATINUM EAGLE	1,251.20	1,267.50	1,251.20	1,266.50	40.70
	SILVER AMERICAN EAGLE	15.36	16.01	15.27	15.89	0.53
	90% SILVER COINS	13.65	14.28	13.56	14.17	0.52
	40% SILVER COINS	13.76	14.42	13.67	14.31	0.54
Updated at: May 9, 2006 9:32:50 AM
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[ex-snook]

If Bernanke thinks inflation is curtailed then the country is headed for another Carter administration double digit debacle.

[oblomov]

YEE-HAW...

[Pondman88]

when do I sell????

[DebtAndDelusion]

A year ago each of those coins could be had for less than $500. Now they are over $700. Increasingly gold becomes "too expensive" for the average American to own. Or so they think -- gold still dirt cheap compared to where its going.

Yet the value of gold does not change -- only its relationship to paper assets in terms of "dollars". Now when a "dollar" was ten dimes, four quarters or two half dollars of the pre-1965 coinage your post references the relationship with gold could only change so much because the dollar was based on silver content.

Now a dollar is just a bunch of 1's and 0's on the computer screens. Heck, lots of people are starting to hoard nickles and pennies because the copper prices are going so high. The dollar is becoming a joke.

Gold may be expensive -- but it won't sell you out like an American politician.

HG

[ghostrider]

When you would rather have a chest full political promises, rather than something constant and enduring.

[simon says what]

I'd love to see a chart that tracks gasoline and gold prices in parallel.

Here is one comparing the price of Gold, Silver, Copper, Oil, and Unleaded Gasoline.

[Proud_USA_Republican]

http://personal.fidelity.com/products/funds/mfl_frame.shtml?316390491

NG, Oil, and Gold & minerals. Only way to go right now.

[vietvet67]

I'm following Jim Sinclair at www.jsmineset.com who's target is $1650 although others are calling for $3000-5000 an oz.

Heck, this bull might run for so long that I'll be on the wrong side of the grass when it ends. :-)

[ex-Texan]

I agree 100%. Except that deepening deflation will hit housing. Using home refinancing to live beyond one's means has fueled the economy for the past five years. Don't blame Bernanke. Blame Greenspan. Greenspan personally endorsed using risky option ARM mortgages. Housing bubbles, mortgage bubbles, and now, foreclosures are booming. Result: Gold skyrockets and housing languishes and then goes down. Watch the stock market very closely. Bloomberg warned last week that selling after the high in May was prudent. The 'Bear Market Blues' come next. Housing is in a 14 year cycle. Full rcovery will take another 13 years.

[bert]

Thanks for that chart.

[DonaldC]

So if this runup is in part due to the Fed pumping too much money into the economy, what is their motivation for doing so because it does not seem to be a very healthy move?

[ghostrider]

Inflation doesn't always jump smoothly across the board. It often bubbles up sector at a time - like the stock market, real estate market, commodities market etc. Over time it always tracks the expansion of the money supply - which our secretive government cabal of crooks hides from us. Inflation will peak sometime after the expansion of the money supply peaks.

[vietvet67]

From what I understand the world is awash in U.S. dollars as the fed wants to keep the stock and real estate markets afloat. Out of control money supply = inflation. Tack on world events, oil pricing and the U.S. dollars downward spiral and it all adds up to an eventual gold price that few can imagine. Some even say the dow and gold prices will cross.

[capitalist229]

The Dow/Gold ratio is now at 18:1 and has been down to 1:1

Dow/Gold 5000/5000 ?

BUMP

[vietvet67]

I agree with that entirely but wonder how the fed keeps the housing market from contracting and at same time get foreigners to continue to buy our debt. Think the fed's in a corner on that one..

[onyx]

We're not selling and he bought it cheap.

[E. Pluribus Unum]

Thanks for the link, but 200 days is meaningless unless you want to hype speculative investment so you can pump and dump.

A 50-year span would be much more informative.