By Chikako Mogi
TOKYO, Feb 17 (Reuters) - Gold rallied to its strongest in
7 months on Tuesday as buying by investors accelerated after
prices surpassed last week's highs and the spectre of global
economic instability lingered.
New York gold futures also hit their highest level since
July, with the most active April contract <GCJ9> rising as high
as $961.1 an ounce, up $18.9, or 2 percent from Friday's New
York settlement of $942.2 in after-hours trading.
"Chart-based buying and persistent demand for investment
purposes have been the fundamental triggers for such
accelerated gains when almost all other asset classes are
heading further south," said Pradeep Unni, an analyst at
Dubai-based Richcomm Global Services.
"If the economic crisis sustains, fund flow into the yellow
metal may support the prices from any deep slide," he said.
Spot gold <XAU=> was trading at $957.20 per ounce, up
$16.30 from late Monday's levels. It had hit a 7-month high of
$958.80, surpassing last week's highs around $951, and was
moving closer towards a record high of $1,030.80 struck last
March.
U.S. markets were closed on Monday for the Presidents' Day
holiday.
In Australia, gold also hit a record high $1,493.61 an
ounce <XAUAUD=R>.
"Prices are rising in a thin market with little physical
demand, and pushed higher by those drawing technical charts to
see how far the market can go," said a trader at a Japanese
firm.
"Speculation about hedge funds facing redemptions is
positive for gold. But there is also the risk that if momentum
fades, prices could fall as much as they have risen."
Traders have pointed to the record high holdings at the
world's largest gold-backed exchange-traded fund, the SPDR Gold
Trust <GLD>, as evidence of the strong investor interest in the
precious metal.
Latest figures show holdings unchanged after hitting a
record 985.86 tonnes as of Feb. 13, up 15.29 tonnes or 1.6
percent from the previous day. []
The trust's gold holdings are up more than 205 tonnes, or
26 percent, so far this year.
More gloomy economic news from Japan on Tuesday burnished
gold's allure as an investment.
Confidence among Japanese manufacturers remains mired near
record lows and service-sector sentiment sank to an all-time
low, a Reuters poll showed, as the economy slid deeper into
recession against a backdrop of global economic strife.
[]
The dollar rose to its highest in more than a month against
the yen, and while a stronger dollar typically weighs on gold,
the relationship has decoupled recently as both benefited from
safe-haven type buying.
Oil prices hung below $37 <CLc1> a barrel as bleak economic
indicators in Asia returned focus to slumping demand. []
Gold has traditionally gotten a boost from strong oil
prices as some investors look to the metal as an inflation
hedge.
Russia's central bank has increased gold's share in
reserves, and plans to continue this trend in 2009, first
deputy chairman told Reuters in an interview on Monday.
[]
PRICES
Precious metals prices at 0547 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 957.20 16.30 +1.73 8.75
Spot Silver 13.86 0.29 +2.14 22.44
Spot Platinum 1070.00 7.00 +0.66 14.81
Spot Palladium 215.00 1.50 +0.70 16.53
TOCOM Gold 2853.00 74.00 +2.66 10.88
59808
TOCOM Platinum 3184.00 79.00 +2.54 20.06
9971
TOCOM Silver 408.10 11.50 +2.90 27.81
365
TOCOM Palladium 654.00 22.00 +3.48 18.91
310
Euro/Dollar 1.2648
Dollar/Yen 92.43
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Miho Yoshikawa and Lewa Pardomuan;
Editing by Clarence Fernandez)
