Bullion price closes in on record high

Gold breached the $1,020 mark on Wednesday, closing in on the record price set last March as bullion was boosted by renewed dollar weakness and concerns about the outlook for inflation.

Gold rose 1.4 per cent to a high of $1,020.50 a troy ounce after settling at $1,005.90 at the end of Tuesday’s session in New York, its highest ever closing price.

Gold hit a record $1,030.80 in March 2008 and appears to be gathering strength for another challenge on that peak.

“The real gold price is now trading well above its long-term ‘fair-value’ level,” cautioned Peter Lucas, investment strategist at RBC Wealth Management.

Investment inflows into gold exchange funds have picked up in recent weeks, rising 34.3 tonnes in September, more than double August’s inflows.

Dealers are looking forward to Friday’s report on positioning from the Commodity Futures Trading Commission to see if speculators have extended their bets on gold prices rising. The net speculative long position stood at a record high in last week’s report, leading to concerns that the market might be vulnerable to a correction if the rally stalled and hedge funds decided to take profits.

Noting that speculative activity in gold futures was far higher than ETF demand, Walter de Wet at Standard Bank said: “While gold has been defying a break lower, the risk remains for some pullback. We would buy gold on such a break lower.”

Silver pushed through the $17 mark for the first time in a year, up 2.3 per cent to $17.36 a troy ounce.

Platinum added 1.1 per cent at $1,337.50 a troy ounce with investors holdings in platinum ETFs standing at a record 533,000 ounces.

Palladium gained 1.5 per cent at $296 a troy ounce with investor holdings in palladium ETFs also standing at a record above 1m ounces.

Crude oil prices rose following the latest US inventories data. Nymex October West Texas Intermediate was up $1.58 at $72.51 a barrel while ICE October Brent gained $1.81 to $71.67.

US crude stocks fell 4.7m barrels last week, well above the consensus forecast for a decline of 2.4m barrels last week. Crude imports dropped below the 9m barrels a day mark, down 192,000 b/d to 8.9m b/d last week.

The decline in crude stocks was offset by increases in petrol and heating oil inventories and a reduction in refineries’ activity.

Petrol stocks rose 500,000 barrels last week, almost matching the consensus forecast for an increase of 600,000 barrels.

Petrol demand averaged 9.22m b/d over the past four weeks, up 3.5 per cent compared with the same period last year. However, analysts warned the comparison with last year was heavily distorted by hurricane disruptions in 2008. Nymex October RBOB unleaded gasoline rose 2 cents, or 1.2 per cent, to $1.8098 a gallon.

Distillate stocks (including heating oil) rose 2.2m barrels, above the consensus forecast for an increase of 1.3m barrels. Distillate inventories reached a fresh 26-year high, leading to concerns about where these stocks will be stored.

Nymex October heating oil added 1.5 cents, or 0.9 per cent, at $1.79510 a gallon.