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By Frank Tang and Atul Prakash
NEW YORK/LONDON, Feb 21 (Reuters) - Gold ended higher on
Thursday in choppy trade that saw prices hit a historic high on
a struggling dollar and supply worries, then gave back some
gains on a sharp decline in crude oil prices.
Other precious metals also rose. Silver hit a 27-year high
above $18 an ounce, a spike of 22 percent this year, while
palladium jumped more than 9 percent to a 6-1/2-year high
before paring gains.
"The outlook for gold remains positive given the
expectations for continued dollar weakness, further Fed rate
cuts and inflationary and macroeconomic concerns," Suki Cooper,
precious metals analyst at Barclays Capital, said.
"Although speculative length remains elevated, we would
expect further safe-haven buying to buoy prices," she said.
Spot gold <XAU=> rose to $944.40/945.20 an ounce by New
York's last quote at 2:15 p.m. EST (1915 GMT) from
$934.80/935.60 late on Wednesday. During the session, gold hit
a high of $953.60.
The gold contract for April delivery at the COMEX division
of the New York Mercantile Exchange <GCJ8> settled up $11.40 or
1.2 percent to $949.20 an ounce.
"At the moment, it appears to be investor demand which is
the real driving force" behind gold's rise, said Daniel Hynes,
metals strategist at Merrill Lynch."And that is influenced by
things such as a weak dollar, risk aversion and inflationary
fears."
Gold fell off session highs with sliding U.S. crude oil
futures <CLc1>, which settled down $1.47 at $98.23 a barrel
after a government report showed rising crude inventory. Lower
crude oil prices diminish gold's appeal as a hedge against
oil-led inflation.
But gold was buoyed by a slipping dollar. The U.S. currency
was weighed down by minutes from the Federal Reserve's January
policy meeting, which affirmed expectations of further U.S.
interest rate cuts.
Markets have priced in the risk of another half percentage
point rate cut at the Fed's March meeting, which would further
erode the dollar's appeal to global investors.
Dollar weakness tends to boost the price of gold, making
the precious metal cheaper for other currency holders.
"There is a real possibility of a spike above $1,000 an
ounce, although I am not convinced at this stage about its
longevity above that price," Hynes said.
BULLISH FACTORS
Analysts said there were several reasons to be bullish.
"There is no single reason why investors hold gold. Some
fear a dollar crash, others buy gold for a liquid way of
playing the commodity cycle, others will have bought it on
momentum," said John Reade, metals analyst at UBS Investment
Bank.
"But yesterday's move shows another reason. We believe that
many investors have bought and held gold because of fears of
stagflation, coupled perhaps with worries about financial
system risk," he said in a client note.
In other metals, platinum <XPT=> hit a record high of
$2,182 an ounce and was last at $2,151/2,161, up from
$2,120/2,130 in New York on Wednesday.
"Clearly any weakness in the price is pounced on quickly by
investors as there are plenty waiting on the sidelines to enter
into the market," Hynes of Merrill Lynch said.
Platinum has jumped 40 percent this year after mines in
South Africa, accounting for 80 percent of world output, were
shut for five days at the height of last month's power crisis.
South African power utility Eskom said it had contracted 30
million tonnes coal of the 45 million tonnes it needs over the
next two years to help resolve a crippling power crisis.
In investment news, London-based ETF Securities said on
Thursday its platinum exchange traded commodity fund <PHPT.L>
had more than doubled its holdings of the precious metal to
302,000 ounces since the start of January.
The company said holdings in its palladium exchange traded
commodity <PHPD.L> had jumped by more than 200 percent to
139,000 ounces over the same period. []
Palladium <XPD=> rose as high as $525 an ounce, tracking
strong platinum prices. It was last quoted at $510/515, against
$481/484 late in New York on Wednesday. Silver <XAG=> hit a
high of $18.03 before falling to $17.84/17.89, against
$17.76/17.81, its U.S. market close on Wednesday.
