| Gold soars on inflation and interest { November 2005 } Original Source Link: (May no longer be active) http://news.ft.com/cms/s/48216fda-674a-11da-a650-0000779e2340.htmlhttp://news.ft.com/cms/s/48216fda-674a-11da-a650-0000779e2340.html http://news.yahoo.com/s/ft/20051207/bs_ft/fto120720051304539831
Gold soars on inflation and interest rate fears
By Dave Shellock Wed Dec 7,12:55 PM ET
Fresh concerns about inflation and interest rates unsettled US and European equities on Wednesday but helped drive the price of gold to its highest for nearly a quarter of a century.
Lena Komileva, G7 market economist at brokers Tullett Prebon, noted that recent comments from Federal Reserve officials had done little to dissuade the market that US monetary policy was getting close to neutral.
"However, interest rates are still seen to be near the bottom end of the 'neutral range', which means there are more rate hikes in the pipeline," she said.
"In the meantime, inflation remains a concern, which has given rise to the view that the Fed will continue to hike rates to 4.75 per cent."
By midday in New York, the Dow Jones Industrial Average was down 0.1 per cent, the S&P 500 was 0.2 per cent lower and the Nasdaq Composite was off 0.3 per cent.
The weakness came in spite of a rise for shares in Ford Motor after reports that the carmaker was planning to axe up to 30,000 jobs in north America.
An early spike in oil prices prompted some concerns on Wall Street, although data showing an unexpected increase in crude supplies last week cooled the market later.
Nymex January crude futures were hovering just below the $60 a barrel level in midday trading in New York, after hitting $60.68.
Nymex futures have advanced steadily over the past week as cold weather arrived in the US north-east. There was some support for prices from renewed concerns thatterrorist strikes on oil installations could hit supply levels.
Early gains for European stocks faded away by the close, in spite of a 2.4 per cent rise for telecoms heavyweight Vodafone after it reported a big increase in Japanese customers.
The FTSE Eurofirst 300 index closed down 0.2 per cent at 1,265.43, after touching a 3½-year high of 1,273.53. But Asian stocks were on an upward track, with the Nikkei 225 in Tokyo climbing 0.4 per cent and the South Korean Kospi index recording a sixth consecutive record high.
Gold continued to march higher, hitting a new 24½-year peak of $516.30 as the recent appetite of funds for the metal showed little sign of being sated.
The dollar made gains against most leading currencies as the tax break forUS companies repatriating overseas profits under the Homeland Investment Act (HIA) continued to provide support.
"Renewed speculation of dollar-supportive HIA flows is partially responsible for the currency's rise," said HSBC.
"And while HIA's shelf life is pretty much limited to this month, those flows - actual and speculated - can still impact the market, especially as liquidity begins to diminish at this time of year."
The sharpest declines came in recently buoyant high-yielding currencies such as the New Zealand and Australian dollars.
But the euro also lost some ground as European Central Bank officials reiterated that there would not be a Fed-style series of eurozone interest rate increases next year.
The yen remained close to a 32-month low against the dollar amid expectations that there would be no change to Japan's zero interest rate policy in the near future.
Treasury bond prices gave back some of Tuesday's strong gains, sending yields higher, as traders positioned themselves for an auction of $13bn of five-year paper.
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