(Recasts, updates with closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Veronica Brown
NEW YORK/LONDON, Jan 8 (Reuters) - Gold surged to a record
high above $880 per ounce on Tuesday as funds poured into the
market amid a broad commodity rally, confident of further upside
in the metal with support from a weaker dollar and firm oil.
Spot gold <XAU=> sprinted to a record $881.10 an ounce,
surpassing the historic high of $869.05 hit last week.
Bullion traded at $878.10/878.90 by New York's last quote at
2:15 p.m. EST (1915 GMT), up sharply from $859.70/860.40 quoted
late in New York on Monday.
U.S. gold futures finished above $880 after scaling a record
high. The most-active gold contract for February delivery <GCG8>
settled up $18.30 or 2.1 percent at $880.30 an ounce on the
COMEX metals division of the New York Mercantile Exchange.
The contract hit a session high of $884.00, surpassing the
previous record high of $875 set Jan. 21, 1980 for COMEX futures
on a continuous spot-month basis.
"I think gold is starting to come into its own now as a
currency, and people have started to realize it," said Neal
Greenberg, trader with RBC Proprietary Trading at Red Bank, New
Jersey.
Traders and analysts said gold and other commodity prices
had found support so far in January from fund reallocation cash,
with pension funds and other long-term investors having pumped
an estimated $100 billion or more into commodities over the past
five years.
"There's significant buying from people re-rating their
commodity indices and adding to the amount of gold they have,"
said Ross Norman, managing director at TheBullionDesk.com.
Gold, along with crude oil, are often among the top
components in many commodity funds.
Traders also noted buying interest ahead of the launch of
the Shanghai gold futures contract.
But the stakes were being raised for a corrective sell-off
as investors are holding record-large long positions already in
the U.S. futures market, analysts said.
"There is definitely investor money coming into the market
which is no surprise with economic environment's ongoing
uncertain outlook," said Alexander Zumpfe, a trader at Heraeus.
There was market talk that buying by funds in gold on
Tuesday totaled 5 tonnes, spreading across three to four brokers
in clips of 60,000 ounces, traders said.
WIDER INVESTMENT
Broader investment interest in gold remained solid moving
into 2008, with gold held in New York-listed StreetTRACKS Gold
Shares, the world's largest gold-backed ETF, rising to a record
high of 639.35 tonnes by Jan 7.
"The steady influx of money to gold ETFs ... and the large
volume of shares in the big gold mines being traded are proof
that there are still a large number of new investors attracted
to this market, which should provide a support line for the
price," Commerzbank analyst Eugen Weinberg said in a note.
Fundamentals played in gold's favor with a weaker dollar
making the metal cheaper for non-U.S. investors.
Meanwhile, a sharp bounce in crude oil prices propelled
bullion higher as gold is often used as a hedge against oil-led
inflation. U.S. crude oil <CLc1> ended up $1.24 at $96.33 a
barrel on Tuesday, after falling almost $3 to $95 on Monday.
In Tokyo, the key December 2008 gold contract <0#JAU:> on
the Tokyo Commodity Exchange (TOCOM) ended at 3,097 yen a gram,
up 53 yen or 1.7 percent from Monday's close of 3,044 yen.
In other metals, platinum advanced in line with sharp gains
in Japanese platinum futures. Key TOCOM platinum for the
December delivery closed up 1.5 percent at 5,313 yen a gram.
Japanese platinum futures often set the trend for the cash
price as TOCOM is the most liquid market for the white metal.
Spot platinum <XPT=> rose as high as $1,547 an ounce and was
last quoted at $1,547/1,552, versus $1,530/$1,534 quoted in New
York late on Monday, closing in on last week's record $1,553.
Palladium <XPD=> rose to $376/379 an ounce from its previous
finish of $365/$368, while silver <XAG=> was at $15.70/15.75,
against $15.12/15.17 late in the U.S. market.
(Additional reporting by Atul Prakash in London and Chikafumi
Hodo in Tokyo, editing by Matthew Lewis)
