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Gold 700 for first time since 1980 in { May 10 2006 } Original Source Link: (May no longer be active)
http://www.chicagotribune.com/business/chi-0605100174may10,1,2426818.story?coll=chi-business-hedhttp://www.chicagotribune.com/business/chi-0605100174may10,1,2426818.story?coll=chi-business-hed
Gold tops $700 for 1st time since 1980
Oil back above $70 as Iran worries mount
Bloomberg News
Published May 10, 2006
NEW YORK -- The price of gold on Tuesday jumped past $700 an ounce for the first time since October 1980, and crude oil climbed above $70 a barrel as tensions increased over Iran's nuclear-research program.
The U.S. said a letter from Iran's president has not reduced its determination to halt the Islamic republic's plan to enrich uranium. Geopolitical turmoil can spur investors to buy precious metals. Gold touched a record $850 an ounce in January 1980 after the 1979 Iranian revolution cut oil exports.
Gold futures for June delivery surged $21.60, or 3.2 percent, to close at $701.50 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $702.20.
The precious metal has surged 33 percent this year and has gained 25 percent since Jan. 9, when Iran said it had resumed nuclear research.
"No one is buying Iran's overtures," said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. "This is purely a geopolitical move for gold. We've been here before. The difference is that this time there are nukes involved."
Platinum for immediate delivery soared $41, or 3.4 percent, to a record close of $1,236.50 an ounce.
Prices have climbed 41 percent in the past 12 months.
Crude oil for June delivery rose 92 cents, or 1.3 percent, to close at $70.69 a barrel on the Nymex. Oil touched $71.45 a barrel during the session. Futures reached $75.35 on April 21 and 24, the highest level since trading began in 1983.
Prices are up 36 percent from a year ago.
"The near-term floor of prices is somewhere around $70" a barrel for oil, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. "There are people in the market who see prices around there as a buying opportunity."
Gold also gained on speculation central banks will sell their dollar reserves and buy gold.
Some of China's economists are urging the country to quadruple its gold reserves, to 2,500 tons from 600 tons, Reuters said, citing an official industry newspaper. China's reserves have remained stable since December 2002.
"China wants to move away from U.S.-denominated assets," said John Licata, chief investment strategist at Blue Phoenix Inc., an energy and precious-metals consulting company in New York. "This is good for gold as the dollar weakens." Licata expects gold to touch $850 this year.
A weaker dollar is helping boost the allure of gold. The metal traditionally moves in the opposite direction of the currency.
That relationship changed last year, when gold gained 18 percent while the dollar climbed 14 percent against the euro.
The dollar approached a one-year low against the euro amid speculation the Federal Reserve will pause in its interest-rate increases after it raises borrowing costs for a 16th consecutive time on Wednesday.
"People who are bullish on gold are doubtful the Fed is committed to fighting inflation," said Daniel Vaught, an analyst at A.G. Edwards & Sons Inc. in St. Louis.
A government report scheduled to be released Wednesday is expected to show that U.S. oil supplies fell last week as refiners increased gasoline output.
"We are waiting for the report to give us a better idea of what to do," said Bill O'Grady, an analyst with A.G. Edwards & Sons in St. Louis. "The focus will be on refinery runs and what that means for gasoline stocks. We'll also be paying attention to gasoline demand."
Economists forecast that gasoline supplies increased 1 million barrels last week, up from 202.7 million the previous week. Last week's report from the Energy Department showed that inventories rose for the first time in nine weeks.
Gasoline futures for June delivery increased 4.3 cents, or 2.2 percent, to $2.0466 a gallon. Prices are up 38 percent from a year ago.
The government "report could take a lot more steam out of the gasoline market," Lynch said.
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$701.50
Tuesday's closing price for an ounce of gold
$850
Record close set in 1980
Copyright © 2006, Chicago Tribune
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