Gold prices hit a six-month high on Thursday, approaching the $1,000 a troy ounce mark for the fifth time in two years, as wary investors pulled back from equities.
Traders said that the bulk of the buying came after a confluence of bullish chart signals triggered speculative flows into the precious metal. Spot bullion in London hit an intraday high of $992.55 a troy ounce, the highest since late February.
“The price charts had been flagging buying signals,” said Jonathan Spall, a gold specialist at Barclays Capital in London. “Gold has a positive technical picture.”
Gold has attracted investors since the collapse of Lehman Brothers last year as an insurance against the financial crisis, but also amid concern that the extraordinary steps taken by central banks to prop up the global economy could lead to higher inflation in 2010.
Hedge funds that made money last year by betting against the survival of Wall Street banks, including David Einhorn’s Greenlight Capital fund and Paulson & Co, have bought gold this year as a way of betting against the ability of central banks to steer the world out of crisis without triggering inflation. Their strategies have drawn in more investors.
The dollar’s recent slide against other currencies has helped underpin gold. Nevertheless, traders and analysts were doutbtful about the prospects of a substantial rally in the gold price beyond $1,000.
James Steel, head of precious metals research at HSBC in New York, said that gold could rise just above $1,000, but cautioned that “the extreme weakness in global jewellery demand together with a surge in scrap would stall the rally”. Jewellery demand for gold sank to a five- and-a-half-year low in the second quarter of 2009.
Edel Tully, an analyst at Mitsui & Co in London, said that gold had battled with the $1,000 an ounce level four times since 2008 and each breakthrough attempt had been short lived.
In dollar terms, gold broke above resistance levels, with traders saying that the next hurdle was February’s peak of $1,005 followed by the March 2008 record of $1,035. In euro and sterling terms, spot bullion broke above its 100- and 200-day moving averages, both considered as buying signals. In euros, gold hit €690 per ounce.
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