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Thursday, November 05, 2009
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Bloomberg.com
Gold futures surged to a record on Wednesday, as a weak dollar and India's recent purchase of bullion continued to whet investors' appetite for the precious metal.
Gold for December delivery, the most actively traded contract, hit an intraday high of $1,094.60 an ounce in electronic trading on Globex, a record for the contract. It surpassed Tuesday's peak of $1,088.50 an ounce.
December gold futures were last up $8 to $1,092.90 an ounce.
"Gold can hold these levels, and while it is slightly overbought in the short term, it remains undervalued from a long-term inflation and historical basis," said Mark O'Byrne, director at bullion dealers GoldCore.
"What is really behind the recent rally is very robust diversification demand from central banks, hedge funds and pension funds," he wrote in a note to clients.
Also, at the conference of the London Bullion Market Association in Scotland earlier this week, market players gave a very bullish outlook, O'Byrne said.
The front-month, but very thinly traded, November contract rose $8.60 to $1,092.90 an ounce Wednesday on Globex, after closing at a record $1,084.30 in New York.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY
76.05, -0.33, -0.44%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.3% to 76.143 in recent trading. Gold prices tend to rise when the dollar falls.
On Tuesday, December gold closed up $30.90 an ounce, or 2.9%, to $1,084.90 an ounce, a record closing level for the contract.
The International Monetary Fund said on Monday that it sold 200 metric tons of gold to the Reserve Bank of India, part of a total of 403.3 metric tons of gold approved for sale in September. The news of India's purchase underpinned gold's advance on Tuesday. See Tuesday's Metals Stocks.
Tom Pawlicki, analyst at MF Global, expects "gold prices to make further upside progress over the near term."
"Support will come from IMF sales to India, planned dehedging by Barrick, hedge-fund purchases, and technical factors," Pawlicki wrote in a note to clients.
Source: Bloomberg