RTRS: Gold strikes record on inflation, economic worries
By Lewa Pardomuan
SINGAPORE (Reuters) - Gold defied a rebound in the dollar on Monday and powered to a record on safe-haven buying, driven by growing worries about inflation and a drop in U.S. stocks that stirred doubt about the economic outlook.
Bullion, which has gained around 32 percent so far in 2009, struck a succession of lifetime highs in November as sentiment turned extremely bullish after India acquired 200 metric tons of the precious metal from the International Monetary Fund.
Gold was quoted at $1,161.25 an ounce by 0202 GMT (9:02 p.m. EST), up $13.05 an ounce from New York's notional close on Friday. It hit another record at $1,161.80 in a thin trade also driven by technical buying after bullion surpassed previous record.
"We're in unchartered territory. It's going to move fairly freely. Momentum becomes quite a big driver of prices. You could see the hint of safe haven buying returning," said Mark Pervan, ANZ's senior commodities analyst.
"There is increasing expectation that the market could deleverage risk toward the end of the year. There's a view that we could see some selling in equity markets, that lowering a risk would also benefit gold prices."
U.S. gold futures for December delivery added $14.4 an ounce to $1,161.20 on the COMEX division of the New York Mercantile Exchange, having struck a record at $1,162.50.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,117.493 metric tons as of Nov 20, unchanged from the previous business day. Trading was thin in Asia, with Japanese speculators away for a holiday.
The dollar inched higher on Monday, extending a short-covering bounce as investors pared risk trades in a holiday-thinned week, while oil rose toward $78 a barrel on heightened tensions between Iran and Western nations.
In theory, a firmer dollar makes dollar-priced gold more expensive for holders of other currencies, but on the other hand, strong oil prices raise the metal's safe-haven appeal against inflation.
"You've got more high-profile hedge funds visibly investing in gold. That's yet another factor encouraging moves into gold by the wider investor community," said David Barclay, commodity strategist at Standard Chartered in Hong Kong.
Option traders are betting that gold will hit $1,200 an ounce or higher by early next year, and strong options interest could in turn lift underlying prices further into the uncharted territory.
U.S. stocks fell for a third straight day on Friday as investors took weaker-than-expected results from computer maker Dell (DELL.O: Quote, Profile, Research, Stock Buzz) and homebuilder D.R. Horton (DHI.N: Quote, Profile, Research, Stock Buzz) as a further sign the recovery would be anemic.
PRICES
Precious metals prices at 0202 GMT
Metal Last Change Pct chg Day ago pct MA 30 RSI Spot gold $1161.25 $13.05 +1.14% +29.46% $860.10
