Reply #109: Gold Futures Climb - End Near $577

[OrangeCountyDemocrat]

Gold futures climb, end near $577
Analysts predict more gains; copper, platinum at records

By Myra P. Saefong, MarketWatch
Last Update: 2:10 PM ET Feb. 2, 2006

SAN FRANCISCO (MarketWatch) -- Physical and investment demand drove gold futures to almost $577 an ounce at the close Thursday -- a new 25-year high as analysts continued to tout the likelihood for even higher prices.

The per-ounce target levels of $600 gold and $10 silver are "only a question of when not if," said Peter Grandich, editor of the Grandich Letter.

Even so, he says "a serious correction can occur once the excitement of reaching these levels is exhausted."

Gold for April delivery climbed as high as $579.50 an ounce on the New York Mercantile Exchange before easing back a bit to close at $576.80, up $2.80. It's trading at levels not seen since January 1981.

"The drop in supply from central banks, added to the new investment demand from the ETFs (exchange-traded funds), and Japanese and investment bank buying, keeps gold driving forward, barely pausing for breath," said Julian Phillips, an analyst at online resource GoldForecaster.com.

"It's not so much an individual crisis that takes gold up, but the number of potential crises that make one possible and trigger others, that makes gold an attractive investment," he explained.

Meanwhile, "pent-up demand waits for any fall in the price of gold to get in, but it's not coming," he said.

Overall, "there has and is an enormous flood of investment demand coming into gold ," said Peter Spina, an analyst at GoldSeek.com.

"Speculators have their eyes wide-open now and sense well the changing environment gold has entered into. They are helping to drive this market even higher right now," he said.

Nervous trade

The situation in Iran regarding its restart of nuclear research has underpinned gold in recent weeks.

"The unfolding petro-nuclear Iran debacle laced with faith-based overtones is making the average investor quite nervous these days," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.

"A host of bullish factors (Iran, Hamas, oil, inflation, deficits, domestic spying, etc.) is being laid -- news item by news item -- on top of the basic low output/high demand picture of gold," he said.

The International Atomic Energy Agency met Thursday to discuss whether to report Iran's nuclear situation to the UN Security Council.

Mohamed el Baradei, the head of the IAEA, said Iran's restart of nuclear research was not yet a crisis, according to BBC News. The meeting finished Thursday without a vote, and will be resumed Friday, BBC News reported.

Elsewhere in the metals market, March silver tacked on 8.2 cents to close at $9.877 an ounce after climbing as high as $9.915 an ounce. The day's high matches Tuesday's high, which was the loftiest level since 1984.

April platinum climbed, adding $9.20 to close at $1,089.30 an ounce. It tapped a high of $1,091, a record on Nymex for front-month contract.

Sister metal palladium saw its March contract finished up $12.90 at $309.50 an ounce, ending at its highest level since April 2004.

March copper jumped 6 cents, or 2.7%, to close at $2.309 a pound after a new record of $2.315.

On the supply side, inventories of copper were unchanged at 11,653 short tons as of late Wednesday, according to Nymex.

Gold inventories were down 53,036 troy ounces at 7.27 million troy ounces. Silver supplies were flat at 124.8 million troy ounces.

Metals indexes fall back

Over in the equity market, shares of metals-mining companies moved mainly lower, prompting the benchmarks that track the sector to decline.

"Equities remain ready to run even higher if the metals allow them to," said Spina. "Otherwise a correction is due."

The Amex Gold Bugs Index (HUI: amex gold bugs index equal-$ weight
Last: 340.99-3.71-1.08%
HUI340.99, -3.71, -1.1%) fell by 2% to 337.94, with a 3.2% fall in shares of Freeport-McMoran Copper and Gold (FCX: Freeport-McMoRan Copper & Gold Inc.
Last: 62.28-2.03-3.16%

FCX62.28, -2.03, -3.2%) to $62.26 leading the weakness among the index components.

The CBOE Gold Index (GOX:
CBOE Gold Index
Last: 145.03-1.75-1.19%

GOX145.03, -1.75, -1.2%) fell to 143.75 and the Philadelphia Gold and Silver Index (XAU: phlx gold silver index capital-weight
Last: 151.95-1.95-1.27%

XAU151.95, -1.95, -1.3%) was at 150.55, with each down 2.1%.