LONDON — Gold eased from the seven-month high it hit earlier on Thursday as investors took profits, but the metal is expected to push towards highs above $1,000 (U.S.) an ounce on rising interest in the metal as a haven from risk.
Spot gold eased to $978.45/980.05 an ounce at 1230 GMT from $984.50 late in New York on Wednesday. Earlier it touched a peak of $985.95 an ounce, its strongest since July 15.
“I still think we will test $1,000, but the market is extremely long now and we have some profit-taking,” Deutsche Bank trader Michael Blumenroth said. “People are scared, so there is still a flight to safe havens at the moment.”
In sterling and euro terms, gold hit record highs of £692.73 and €785.83. In the Canadian dollar it reached an all-time peak of $1,242.31, and in Australian dollars a record $1,546.29.
Indian rupee-priced gold futures also hit a peak, denting local bullion demand.
Gold climbed nearly 5 per cent this week to its Thursday peak, as fear over the outlook for the financial system and rising inflation in the longer term prompted investors to buy it as a safe store of value.
However, profit taking and a recovery of other assets such as equities and the euro in early trade pushed the precious metal down as much as 1.7 per cent.
“If we see signs the stock markets are recovering, people will come back to stocks,” Mr. Blumenroth said. “If money comes back to the stock market, it will come out of gold.”
But investment demand for apparently safer assets is still supporting bullion.
Canada-based brokerage Canaccord Adams said it had raised its peak gold price scenario to $1,100 an ounce from $950, citing strong demand for the metal as a haven from risk and inflation prospects.
Buying of gold-backed exchange-traded funds in particular is very strong. Holdings of the world's largest gold-backed ETF, the SPDR Gold Trust, rose 1.5 per cent to a record 1,024.09 tonnes as of Wednesday.
“Over the past month, inflows into the ETF have more than equalled mine supply...and are close to matching our estimates of total demand for gold,” UBS strategist John Reade said in a research note.
“This one category of buying is almost responsible for the entire gold market, with other buying via futures, OTC, bars and coins making up the balance.”
The dollar dipped versus the euro as a rise in European share prices reflected easing risk aversion, and as eastern European currencies rallied.
While a weaker dollar typically benefits gold, both assets are for the moment responding to risk aversion, as they are seen as key risk havens. Gold's other main external driver, crude oil, climbed but also exerted little influence over the metal.
In supply news, the world's second-largest gold producer Newmont Mining sees equity gold sales at 5.2-5.5 million ounces in 2009, and reported adjusted earnings per share of 26 cents in the fourth quarter.
Among other precious metals, spot silver dipped in line with gold to $14.26/14.32 an ounce from $14.32. Earlier it peaked at $14.38, its strongest level since mid-August.
Spot platinum slipped to $1,072/1,077 an ounce from $1,097.50, while spot palladium slid to $213/218 an ounce from $217.
The chief executive of the world's number two platinum producer Impala Platinum Holdings said the company was revising its production strategy in response to falling demand.
He said Impala's output target for 2009 had been cut, and he sees lower metal output in the next 18-24 months.
Both platinum and palladium prices have tumbled in the last year as demand from car makers, major users of the metals, slumped.
“Uncertainty in the global automotive industry could mean downside for platinum in the weeks to come,” Standard Bank analyst Walter de Wet said.
