Gold Futures Hit 2-Week High; Dollar Extends Slump
Source: Bloomberg, Pham-Duy Nguyen (1/5/10)
"Commodities continued to receive heaps of cuddly attention from the speculative crowd."
The greenback fell to a two-week low against a basket of six major currencies on bets that the Federal Reserve will keep its benchmark interest rate at a record low for an extended period. Yesterday, gold climbed the most in two months. The metal reached a record $1,227.50 an ounce on Dec. 3.
"The weak dollar and slow economic recovery will continue to enable gold to compete with other asset classes for the marginal investment dollar," said Tom Pawlicki, an analyst at MF Global Inc. in Chicago. He predicted prices will climb to $1,350 an ounce this year.
Gold futures for February delivery rose $7.40, or 0.7%, to $1,125.70 an ounce at 11:11 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $1,129.60, the highest level for a most-active contract since Dec. 17. Yesterday, the price jumped 2%.
The dollar slid last year as the Fed kept borrowing costs low to revive the U.S. economy.
Today, the U.S. currency dropped as traders reduced bets that the Fed will raise its target rate for overnight bank loans by at least a quarter-percentage point by its June meeting. An industry report showed the number of contracts to buy previously owned U.S. homes fell more than analysts forecast in November.
The Reuters/Jefferies CRB Index of 19 raw materials extended a rally to a 14-month high.
"Commodities continued to receive heaps of cuddly attention from the speculative crowd," Jon Nadler, a senior analyst at Kitco Metals Inc. in Montreal, said in a report.
Optimism that global economic growth will gain momentum in 2010 is pushing up stock and commodity markets. Gold will be the "place to be" for investors this year, said Peter McGuire, a managing director at CWA Global Markets Pty in Sydney.