MW: Gold hits record above $1,217-ounce on strong demand
By Polya Lesova & Myra P. Saefong, MarketWatch
FRANKFURT (MarketWatch) -- Gold futures climbed to a record above $1,217 an ounce on Wednesday, buoyed by strong demand from investors amid worries about the U.S. dollar's continued weakness.
Front-month December gold futures have posted gains in all but two trading sessions since the beginning of last month.
The contract climbed as high as $1,217.30 an ounce in electronic trading on Globex, surpassing the record set in the previous session.
December gold was last up $13, or 1.1%, to $1,212.10 an ounce.
"The continued weakness in the (U.S. dollar) as well as falling U.S. real interest rates have spurred strong investment interest for precious metals over the last few months," said analysts at Credit Suisse in a note to clients Wednesday.
"Speculative positioning shows a sharply rising net long position in gold and silver," they said.
Commodity sector funds took in more than $1 billion for the second week in a row during the week ended Nov. 25, according to data from EPFR Global.
The inflows fell just short of the previous week's record-setting $1.34 billion, as investors sought hedges against U.S. dollar weakness and inflation.
Year-to-date, flows into this fund group stand at $14.6 billion, EPFR Global said.
"As long as these drivers, i.e. the softer U.S. dollar, lower interest rates, reduced risk aversion and benign equity markets, remain at play, the upward trend in commodities should continue," said analysts at Commerzbank AG in a note.
Dollar trades mixed
Gold and the U.S. dollar have had a strong inverse relationship, meaning that when the dollar falls, gold prices tend to rise. The precious metal is seen as an investment that can hold its value in contrast to the greenback's continued devaluation.
Gold rose Tuesday, as the dollar traded mixed against its major rivals. The greenback rose against the Japanese yen, but fell against the euro and the British pound.
The dollar index (DXY 74.41, +0.04, +0.06%) , which tracks the greenback's performance against a basket of other major currencies, edged up to 74.399. On Tuesday, it fell to 74.328, its lowest level since August 2008.
The index has dropped more than 8% this year, while gold has risen 36%.
In Asia Wednesday, investors bet on upbeat prospects for gold miners, fueling a rally among related shares in Australia and China. See story on prospects for Asia's gold-miner stocks.
On Tuesday, gold futures gained 1.5%, as the dollar weakened and Barrick Gold Corp. (ABX 46.07, +3.38, +7.92%) (CA:ABX 48.20, +3.34, +7.45%) said it has eliminated its gold hedges ahead of schedule and now has full leverage to the gold price.
Gold "is swept along by increasing systemic risk appetite, longer-term inflation concerns and diversification from the dollar, with $1,250 the next likely target," said James Moore, an analyst at TheBullionDesk.com, in a note to clients.
"Barrick's announcement yesterday is an indication of producers' confidence in gold prices going forward and potentially could trigger further sharp price gains in the short term," Moore said.
