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Gold Hits New Record of $970 on Dollar’s Tumble

February 28, 2008 at 10:44 by Mario

Gold futures rose to a record high of $970 an ounce Thursday, propelled by the dollar’s tumble to a new low against the euro. Gold for April delivery hit $970 an ounce on the New York Mercantile Exchange. The contract was last up $6.80 to $967.80 an ounce.
“The recent string of U.S. data has been appalling and this is putting significant pressure on the dollar and supporting gold,” said Mark O’Byrne, executive director at Gold and Silver Investments Ltd., in a note.
On Wednesday, gold rose $12.10, or 1.3%, to $961.0 an ounce. Earlier in that session, the contract hit a record $967.70 an ounce.
Weakness in the U.S. dollar boosted gold’s investment appeal. Gold, like many commodities, is denominated in dollars, and a lower U.S. currency makes it more affordable in other currencies.
‘The recent string of U.S. data has been appalling and this is putting significant pressure on the dollar and supporting gold.’
— Mark O’Byrne, Gold and Silver Investments Ltd.
On the currency markets Thursday, the dollar remained under pressure as it buckled to fresh record lows against the euro after lackluster U.S. data.
The 15-nation currency rose as high as $1.5194, its loftiest level since it began trading in January 1999, as U.S. Federal Reserve Chairman Ben Bernanke spoke on Capitol Hill for the second day of his report on monetary policy.
While he downplayed concerns that the U.S. economy might be in the grip of stagflation, a combination of low growth and inflation, Bernanke said there would likely be some bank failures, though not large firms.
The trade-weighted dollar index, which measures the greenback against a basket of six major currencies, fell 0.9% to 73.85. See Currencies.
The Commerce Department reported that the U.S. economy grew at an unrevised 0.6% annual rate for the fourth quarter, underscoring how economic conditions slowed toward the end of 2007. And for all of 2007, the economy grew at the weakest pace in five years. Read more.
Also Thursday, the Labor Department reported that first-time claims for state unemployment benefits rose 19,000 last week, reaching the highest level since late January.
Crude-oil futures rose sharply Thursday boosted by dollar weakness. See Futures Movers.
While global capital markets have already priced in a mild U.S. recession, the prices of raw material prices continue to hit new highs, S&P analysts said Thursday. Tighter global capacity along with strong demand from emerging markets has counter-balanced weak demand from developed countries, S&P said.
“We believe commodity prices are benefiting from investors’ increasing worries that inflation, which has begun to inch up globally, will continue to rise,” said Alec Young, international equity strategist for Standard & Poor’s Equity Research, in a statement Thursday.
The current commodity bull market offers opportunities for equities in the materials sector, S&P said. Metals companies have been delivering solid earnings for a sustained period, said Leo Larkin, diversified metals and mining analyst for Standard & Poor’s Equity Research.

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