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Gold surges as investors hunt for safety
By Jack Farchy
Published: May 7 2010 12:04 | Last updated: May 7 2010 22:10
FT.com
Gold surged to its highest level in five months this week as panicking investors pulled money out of risky assets and piled into the precious metal.
The largest physical gold exchange-traded fund, the SPDR Gold Trust, recorded its highest daily inflow since early 2009 on Thursday with total holdings hitting a record 1,185.78 tonnes.
Most analysts and traders believe it is only a matter of time before gold surpasses the all-time high of $1,226.10 set on December 3 last year.That sent spot gold to an intraday peak of $1,213.35 a troy ounce on Friday, its highest level in five months and up 2.9 per cent on the week.
Anne-Laure Tremblay, metals analyst at BNP Paribas, said retail investors had driven the price gains.
“There has been a strong increase in physical gold demand from retail investors on the back of growing concerns over sovereign risk,” she said.
When denominated in euros, gold hit an all-time high of €962.20 this week.
But Ms Tremblay warned that continued fears over the stability of the eurozone would boost the value of the dollar and so suppress gold prices.
Gold prices usually go down when the dollar strengthens, although that relationship has weakened slightly in recent weeks.
Other commodities’ markets suffered a harrowing week as risk aversion swept the markets.
In oil, Nymex June West Texas Intermediate fell $10 in the week to $75.11 a barrel, a 13 per cent correction. That is the lowest price for the US benchmark since February. ICE June Brent, the European benchmark, dropped $9.17, or 10.5 per cent, to $78.27.
Base metals were hard hit after the decision by the Chinese government over the weekend to tighten lending standards further.
Copper for delivery in three months’ time dropped 5.9 per cent in the week to $6,948.75 a tonne, while aluminium was down 7.1 per cent at $2,087 a tonne.
But cocoa bucked the trend. It has benefited from increased demand for chocolate as well as a disappointing crop. Liffe July cocoa hit a 33-year high of £2,430 a tonne on Friday.
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