By Atul Prakash
LONDON, Jan 24 (Reuters) - Gold surged 2 percent to trade
above $900 on Thursday and platinum hit a historic high, as
investors snapped up the metals on dollar weakness and firmer
oil prices, analysts said.
Expectations of a further rate reduction by the U.S. Federal
Reserve after hefty emergency cuts this week also boosted market
sentiment, they added.
Spot gold <XAU=> hit a high of $902.90 an ounce and was
quoted at $900.60/901.30 at 1333 GMT, against $884.75/885.45
late in New York on Wednesday and this week's three-week trough
below $850. It hit a record high of $914 on Jan. 14.
Platinum <XPT=> jumped to a record high of $1,591.50 an
ounce and was last quoted at $1,586/1,591, against
$1,551.50/1,556.50 in New York, after Lonmin Plc <LMI.L>, the
world's No.3 platinum producer, cut its sales outlook for the
year. []
Frederic Panizzutti, analyst at MKS Finance, said the
bullion market saw good long liquidation on the way down in past
days as people took profits and balanced their portfolios
against other assets that decreased in value.
"Those positions had to be covered. That's what is going on
now. Some buyers came in and started to buy back and everybody
realised that we have to take the train at the right time."
"The dollar remains an important factor. There is a lack of
confidence, there is still risk in the financial markets and
people are definitely willing to go for something safer in their
portfolios and gold looks to be that asset again."
The euro strengthened against the dollar after tough talk on
inflation from European Central Bank policymaker Axel Weber
dampened expectations of a possible near-term interest rate cut.
The euro had come under selling pressure in recent weeks as
signs emerged that weakness in the U.S. economy is having a
knock-on effect on the euro zone, fuelling the argument for a
rate cut by the European Central Bank.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil climbed above $88 a barrel, after a late surge in U.S.
stock indices helped cool simmering fears of a recession in top
energy consumer the United States.
"We might see some acceleration in gold's move because it's
very likely that this short-term correction phase is now over,"
Panizzutti said.
STOCK MARKETS WATCHED
The bullion market keenly watched the stock market, with
Britain's top share index rising 4 percent by midday, led by
banks, as hopes of a U.S. government plan to rescue ailing bond
insurers will help stem more credit losses.
Gold fell sharply earlier this week with a decline in
equities, as investors sold to cover margin calls.
"The situation of financial institutions is likely to
improve and this might stabilise stock markets, which would be
positive for gold," Dresdner Kleinwort said in a report.
"It would not only be positive for gold as investors stop
selling gold to cover losses of other assets, but also via a
weaker U.S. dollar and rebounding crude oil prices."
Over the medium term, the market remained bullish.
A Reuters global poll of 50 traders and analysts forecast
average gold prices surging more than 20 percent this year and
gold retaining most gains in 2009 as dollar weakness, market
turmoil and inflation fears stoke investor interest.
[]
In industry news, Peter Hambro Mining <POG.L>, Russia's
second-largest gold miner, said it will take a year longer than
planned to more than triple output to 1 million ounces as a
large new deposit is bigger than expected. []
Silver <XAG=> rose to $16.22/16.27 from $15.97/16.02 an
ounce, while palladium <XPD=> was up at $368/373 an ounce,
versus $362.50/367.50.
(Additional reporting by Lewa Pardomuan in Singapore)
(Editing by Peter Blackburn)
