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Gold scales 28-yr high, platinum sets record

The dollar fell to a record low against the euro and a multi-decade trough versus a basket of currencies on a growing view that another U.S. rate cut could be on the cards.

Dollar weakness makes gold cheaper for non-U.S. investors and a rate cut also reduces the U.S. currency’s yield appeal.

“Gold is still largely a dollar story. There’s a perception in the market that the dollar is going lower, and people are buying into that,” said Stephen Briggs, economist at SG Corporate and Investment Banking.

Spot gold hit a high of $770 an ounce, its highest since January 1980, before paring gains to $768.50/769.30 by 1042 GMT compared with $763.90/764.70 seen late in New York on Thursday.

Gold has gained some 20 percent this year on fund buying driven by favourable currency fundamentals and sharp rises in oil that highlight the metal’s role as a hedge against inflation. More recently it has gained from geo-political tension between Turkey and northern Iraq.

Analysts have said that if those factors stay intact, bullion prices should easily rally to the psychologically-key $800 level hit in January 1980 when gold hit a record $850 per ounce.

But SGCIB’s Briggs injected a note of caution due to extreme speculative positioning on the U.S. COMEX futures market that pointed to the possibility of a correction before another push higher.

“You have to believe there will be a substantial correction before the $800 level,” he said.

Platinum squeezed to record

Further momentum gathered on platinum, taking the market to a record high above $1,450 as supply worries continued to dog the market.

Anglo Platinum, the world’s biggest producer, said it expects to lose up to 1,300 ounces of refined platinum a day after it closed two more shafts at its largest mine.

Dealers and analysts said concerns over supply due to accidents and possible strike action had pushed up one-month lending rates in the past month to between 5-6 percent -- another factor propelling the spot price higher.

Spot platinum hit a record high of $1,454/1,457 up from $1,438/1,443 quoted late in New York on Thursday.

“The very real threat of strike action is making it difficult from traders to go short, and should lease rates tighten further we could well see spot prices push on towards $1500/oz,” said analyst James Moore of TheBullionDesk.com.

In other bullion markets, the benchmark August 2008 contract on the Tokyo Commodity Exchange closed 3 yen per gram higher at 2,873 yen after trading as high as 2,883 yen.

U.S. COMEX gold futures advanced, with the December contract

trading up $4 an ounce from the New York settlement on Thursday to $772.70.

Bullion dealers in Singapore noted sales of scrap from jewellers and other holders who cashed in on gold’s rally.

In India, the world’s main gold consumer, buyers were still hoping for a price correction. Many Indians consider gold an auspicious metal and offer it as a gift during festivals and weddings.

Palladium underperformed compared with other precious metals, staying flat at $369/373. Silver firmed to $13.81/13.86 from $13.74/13.79 late in New York.