- LONDON (Reuters) - Gold was
within reach of its highest level in nearly 16 years on Monday, fired by
a resurgent euro and inflationary fears fanned by sky-high oil prices,
dealers and analysts said.
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- "I don't think we've seen anything yet," Ross
Norman of TheBullionDesk.com told Reuters in a telephone interview.
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- "With the euro where it is, oil where it is and
tension ahead of the U.S. election I think we could see another attempt
at $430.50 and it might just poke through," he added.
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- Bullion, which hit a 15-year peak on January 6 at $430.50,
has traded steadily higher this year, extending a bull cycle that has stretched
out since 2001 when prices fell towards $250.
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- Having struck a fresh six-month peak earlier on Monday
at $430.20 per ounce, dealers said fund buyers would try and push for the
January 6 peak and beyond to levels last seen in 1988, emboldened by a
rampant euro making the metal more attractive.
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- The market's upswing has been influenced by a weaker
dollar, geo-political uncertainty, producers buying back previously sold
forward production and sky-high oil prices fanning inflationary worries.
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- "Oil is playing a part but the dollar is the big
mover in gold," Peter Hillyard, head of European metal sales at ANZ
Bank, told Reuters. He spoke after benchmark U.S. light crude set a fresh
peak of $55.67 a barrel.
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- "The market believes $430-plus (for gold) will be
penetrated and, depending on who you talk to, there are people saying $500.
I think that's a little overdone," he added.
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- The euro rose on Monday to within once cent of record
highs against the U.S. dollar hit in February.
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- Record oil prices and worries about the widening U.S.
current account deficit have hit the dollar -- making gold less expensive
for non-U.S. investors.
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- The rising price of gold was not expected to have an
immediate impact on jewellery prices.
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- Even though analysts had noted the supportive factors
behind gold's drive up, they also raised concerns about massive speculative
exposure which could spark a sharp sell-off further out.
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- Commitments of Traders data, issued by the Commodity
Futures Trading Commission and showing how much of the metal speculators
have bought, showed the net speculative long position in New York's COMEX
gold futures market rose to 120,914 contracts as of October 19, from 115,137
contracts on October 12.
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- "Gold is set to break the year high of $430.50 on
dollar weakness -- but there is little else behind the move at the moment.
Speculators appear to be fully loaded, or very nearly so," John Reade
of UBS investment bank said in a daily report.
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- "For investors looking for a play on dollar weakness
there are probably lower-risk alternatives available."
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- Copyright 2000 Reuters Limited.
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