The glittering new year rally in metals prices continued with recent gains for gold providing inspiration for platinum which rose to a near 26-year peak.
Helped by further speculative and investment buying, platinum rose 1.9 per cent to $1,020 a troy ounce, the highest since March 1980 before retreating to $1,008/$1,012. Demand for platinum could be supported by the development of new diesel-based hybrid cars with the French carmaker Peugeot set to unveil two demonstration models this month.
Gold retreated to $541.30/$542.10 amid profit taking after hitting a new 25-year high of $550.75 in New York on Monday, the highest level since January 1981. However, technical strategists at UBS said gold could reach $600 an ounce in the first half of this year.
Paul Merrick of RBC Capital Markets highlighted a number of longer term factors contributing to gold’s strength with a significant increase in investor demand, illustrated by higher inflows into gold exchange traded funds (ETFs) which have reached 385.8 tonnes.
Mr Merrick also noted that physical demand for gold (predominantly jewellery) is continuing to rise while supply growth is very limited. The Middle East is also proving an enthusiastic buyer of gold as investors recycle petro-dollars from high oil prices.
“With equity returns in most sectors still disappointing and bond yields low, investors have been drawn to the sector as never before,” said Mr Merrick: “Gold plays a small but important part in any commodity portfolio for its diversification and safe haven properties.”
Silver has lagged the rally in other precious metals falling to $8.98/$9.01 a troy ounce yesterday after encountering resistance at $9.23, last December’s peak. Traders said a failure to overcome this resistance point could be a potential warning sign of a stall in gold’s advance.
Base metals continued to rally and three-month copper moved beyond the $4,600 level to $4,610 a tonne before retreating to $4,575, fractionally lower on the day. Traders noted that copper prices resisted downward pressure in spite of a robust 4.1 tonne increase in LME inventories as stocks remain near critically low levels.
Zinc traded 0.6 per cent higher at $1,980.5, edging closer to its all-time high amid concern over possible supply disruptions.
“China (accounting for a quarter of global zinc production and consumption) has really put zinc back on the map,” said Nick Moore of ABN Amro who pointed out that China’s zinc imports rose 68 per cent in the first 11 months of last year while exports shrank by 45 per cent.
Three-month aluminium rose 0.8 per cent to a fresh 17-year high of $2,341.5 a tonne after Alcoa provided an upbeat assessment of current demand conditions and the significant long-run growth potential in emerging markets.
The warning to Iran from the White House that starting nuclear enrichment would be viewed as a serious escalation pushed oil prices higher with Nymex February West Texas Intermediate 50 cents higher at $64.0 while IPE February Brent rose 31 cents at $62.30 a barrel.
Nymex February gasoline traded just over 2 cents lower at $1.7450 a gallon after the Energy Information Administration said it expected US retail prices to average £2.41 a gallon in 2006, unchanged from 2005.