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Gold heads to 16 year high Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=10000086&sid=a8AZJvZjCfS0&refer=latin_americahttp://www.bloomberg.com/apps/news?pid=10000086&sid=a8AZJvZjCfS0&refer=latin_america
Gold Falls From 16-Year High in London as Dollar Halts Slide
Nov. 8 (Bloomberg) -- Gold fell from a 16-year high as the euro slipped after European Central Bank President Jean-Claude Trichet said the currency's rally was not ``welcome.''
``The recent moves which tend to be brutal on the exchange markets between the euro and U.S. dollar are not welcome from standpoint of the ECB,'' Trichet told reporters in Basel, Switzerland, after a meeting of central bank governors from the
A stronger dollar makes gold more costly for holders of other currencies and curbs its attraction as a hedge against declines in U.S. assets.
Gold for immediate delivery fell 50 cents, or 0.1 percent, to $433.05 an ounce in London at 12:54 p.m. It earlier climbed as high as $435.25, the highest since July 1988. The euro was at $1.2941, down from $1.2987, the highest since the currency's debut in 1999.
Most traders, investors and analysts bet gold will rise this week as President George W. Bush's policies of tax cuts and military spending push deficits up and the dollar down, a Bloomberg survey showed.
``Four more years of Bush is a gift to the gold markets -- more war, more deficits, more divisions,'' said Douglas Pollitt, an analyst at Toronto-based brokerage Pollitt & Co.
U.S. Election
Gold has surged more than 60 percent and the dollar has fallen less than 30 percent since Bush took office in 2001. Under Bush, the shortfall in the U.S. current account, the broadest measure of trade, widened to a record $166.2 billion in the second quarter and the budget deficit swelled to a record $412.6 billion in the fiscal year ended Sept. 30.
The U.S. must attract about $1.8 billion a day in overseas money to compensate for the current-account deficit and maintain the dollar's value, according to Bloomberg calculations.
Forty-four of 73 traders, strategists and investors questioned on Nov. 5 from Tokyo to New York advised selling the dollar against the euro. Twenty-nine of 45 traders, investors and analysts surveyed from Sydney to New York on Nov. 4 and Nov. 5 advised buying gold.
``Bush getting re-elected means a bigger deficit, a weaker dollar and higher gold prices,'' said Graham Birch, who manages about $6.5 billion at Merrill Lynch & Co. in London. Birch predicts gold prices will reach $450 before the end of the year and rise $50 in 2005.
Shares in gold miners have gained since the U.S. elections on Nov. 2. Denver -based Newmont Mining Corp., the world's biggest gold miner, gained 7 percent. Shares of Toronto-based Barrick Gold Corp., have gained 8 percent. Newcrest Mining Ltd., Australia's biggest gold miner, rose 1.7 percent.
War, Taxes
Aided by expanded Republican control of Congress, Bush said he would press ahead with the war on terrorism in his new term and make permanent his $1.85 trillion in tax cuts.
The need to finance a record current-account deficit may force the government to sell more debt. The Treasury on Nov. 1 predicted the government would need to borrow $100 billion in the final quarter of this year and a record $147 billion in the first three months of 2005.
Some respondents in the gold survey said the metal may fall on concern the Federal Reserve will raise interest rates this week, boosting the value of the dollar and slowing inflation. The Fed will lift its interest-rate target to 2 percent on Nov. 10, according to all 58 economists surveyed by Bloomberg. Investors often buy gold to hedge against inflation, which erodes the value of fixed-income assets.
``Gold is due for a breather,'' said Adrian Day, president of Annapolis, Maryland-based Global Strategic Management Inc., which manages $85 million.
Last Updated: November 8, 2004 07:58 EST
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