Gold futures soared to $702.2 an ounce on NYCE Tuesday, a new record high since 1980. Gold hit a 25-year high amid the political turmoil in the Middle East, weak dollar and a general upward trend at the world commodities markets. Experts estimate the gold prices should continue growing following adjustment. Some experts argue gold may reach $1,000 an ounce in the foreseeable future.
Gold prices rose more than 40% over the last six months, from November 2005 to May 2006. Gold broke a 20-year high - $500 an ounce - during the above period. Experts believe setting new price level at $700 an ounce is a milestone of the commodities market. “It’s a very important development since it significantly strengthens an overall market trend. Many experts and traders expect the gold prices will keep on rising a lot higher,” said Bernard Hunter, a director of precious metals department at Scotia Mocatta, a Bank of Nova Scotia branch.
Hunter said the market would try to keep the prices above the $700-level, the prices would then keep rising. Experts argue gold might as well hit a new record high of $1,000 an ounce. Gold went up from $700 to $875 an ounce and rolled back to the starting point in a mere one-and-a-half day trade in January 1980 – the highest surge in gold prices, the AP reports.
Investment products such as exchange-traded funds are among the top buyers of gold futures. The funds opt to buy more gold to insure against the political instability, falling dollar, and concerns over supply disruptions.
“It’s really amazing that common physical demand is the only factor that does not affect the gold demand growth,” said Hunter. In other words, the demand for gold as a prime material for the manufacture of jewelry remains unchanged.
The surge in gold prices pushes up prices of other precious and semiprecious metals. In New York on Tuesday platinum traded at $1243 an ounce, while palladium reached $395. Robust demand for gold can only drive gold mining companies’ share prices higher. On Tuesday, the world’s top gold miner Barrick Gold gained 2.6% to $34.87 per share in NYSE.
Copper set a new record high too in the London Metals Exchange. On Wednesday morning trade, copper three-month futures reached an all-time peak above $8,000 a ton amid supply disruptions and an overall decline in copper stock, Bloomberg reports.
Copper has gained 7% since the start of 2006 following more worries about supply disruptions in different parts of the world. Copper producers have to tackle problems due to labor demands for higher wages and stricter safety regulations. Copper producers also have to develop lower-capacity mines.
BHP Billiton, the world’s top miner, sees supply disruptions affecting the market up to 2008. Meanwhile, China ’s demand for raw materials is rising steadily.
“Every day brings new evidence of declining supply, therefore such a surge in prices doesn’t surprise me at all,” said Alfred Wong, analyst at UOB Asset Management, an investment company in Singapore. Experts indicate copper prices will continue rising because record highs of the commodity have no impact on production growth. Consequently, copper may trade at $9,000 a ton in LME before the year’s end, according to forecasts by British consulting companies.
Translated by Guerman Grachev
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