Gold marches to recapture lost peak

May touch $850 an ounce as greenback falls to new lows

TOKYO: Gold edged higher on Friday, with investors keen to drive the metal to a record high of $850 per ounce as the dollar tumbled to an all-time low against the euro and oil staged a rally.

Investment funds were eager to buy gold as the dollar’s outlook turned weaker as expectations mounted for more interest rate cuts after a downbeat economic forecast by Federal Reserve Chairman Ben Bernanke the previous day.

“The market is nervous about taking large positions in gold from here. But gold will be very solid as U.S. interest rate prospects are likely to pressure the dollar,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management.

“Gold is overbought now and profit-taking pressure should grow, but funds will flow into gold because it has been performing extremely well. You really can’t get this kind of return by buying stocks or other financial instruments.”

Spot gold was trading at $833.80/834.60 an ounce by 0700 GMT, from $832.10/ 832.85 late in New York on Thursday. It hit a session peak of $838.90 on Friday.

Dealers pegged resistance around $846 an ounce, while the upside target would be the psychological level of $850 — a record peak struck in January 1980.

Gold is up more than 30% this year, with credit market turmoil, worries about the health of the US economy and record oil prices sending investors in search of safe havens such as precious metals.

The most-active December gold contract on the COMEX division of the New York Mercantile Exchange fell $1.5 ounce to $836.0 an ounce on electronic trade after reaching a session high of above $840 in early Asian trade.

Traders said investment funds and end-users were eager to buy on dips, spurred on by the dollar’s slump and surging oil prices.  “Buyers have been waiting to buy near $800, but now it looks impossible to see that level for a while. Bids are expected to emerge much quicker even at a minor price dip,” Kageyama said.

The dollar tumbled against key currencies on Friday, hitting a 26-year low against sterling and a record trough against the euro as expectations grew for further interest rate cuts.

Gold hedging by mining companies fell 2.1 million ounces to 29.1 million in the third quarter of 2007 and is expected to fall by about 13 million ounces in the full year, a report said.