Posted on 04/06/2006 8:23:09 PM PDT by ex-Texan
NEW YORK (AP) -- Gold futures climbed Thursday to more than $600 an ounce for the first time in 25 years, as other surging commodities, especially in the energy markets, stoked fund-buying momentum.
On the New York Mercantile Exchange, June gold futures, the most active contract, rose to a high of $601.90 an ounce Thursday in Asian trading. In later trading in New York, the contract eased back to settle at $599.70 an ounce after traders took profits, but was still up $7.20 from late Wednesday.
Spot gold, which peaked at $595.60 an ounce, settled up $7.30 at $595.20 an ounce.
Gold prices have been pushed higher by the strength in other commodity prices, such as oil, which has been rising on supply worries and geopolitical tension, and silver, which has seen surging interest in recent weeks due to an upcoming silver exchange-traded fund planned by Barclays Global Investors.
May silver rose 34 cents to settle at $12.045 on Nymex.
Meanwhile Thursday, crude-oil futures rose 87 cents to settle at $67.94 on Nymex.
"Commodity prices have been rocketing so it would seem perverse if gold didn't too," said Clem Chambers, CEO of financial data Web site ADVFN, in a note. "With insufficient supply to meet consumption, with uncertain political developments in the Middle East, with inflation worries slowly but surely increasing and with emerging markets, who are historically strong buyers of gold, also booming; it is hardly surprising that gold is rising."
According to Leonard Kaplan, president of Prospector Asset Management, there hasn't been a close correlation between energy prices and gold prices for a long time, but now the rationale is that rising energy prices will cause inflation, and inflation boosts precious metals.
"It's money chasing money," he said, adding that commodities across the board, from copper to zinc to sugar, have seen big increases without any fundamental reason. "Money is pouring into them simultaneously, without cause or concern or interest in what the values are, or what it's going to be used for. It's all momentum -- it's the flavor of the year."
Some analysts, however, say the rise in gold is linked more to a weakening dollar than inflation worries.
John Doody, editor of the gold research letter Gold Stock Analyst, said fears of a lower dollar, thanks to the current account deficit, are driving the long-term gold bull market, which many market watchers say really began in 2001.
"The dollar is still clearly overvalued," which pushes up gold prices because gold is an alternative investment to the dollar, Doody said.
Doody does not expect rising gold prices to immediately or directly affect consumers -- "the value of jewelry is really in the artistic aspect of it; you melt down a piece of gold jewelry, you might get a third of its value," he said.
But if the surge in gold futures keeps up, consumers may eventually see it trickle down to the price tags on charm bracelets and wedding rings.
"Ultimately if the cost goes up ... over some period of time, the jewelry industry would need to pass that through," said Tiffany spokesman Mark Aaron, adding that the increase still wouldn't be as sharp because labor and craftsmanship factor largely into jewelry pricing.
It's impossible to say how high gold prices will rise and for how long, but many market watchers are saying they could easily surpass the record of about $800 an ounce, and some even say $1000 is a possibility.
"While few will predict $1000 an ounce, few would bet against it," Chambers noted.
"As more and more people pour more and more money into commodities," Kaplan said, "it could go anywhere."
But Kaplan added that he believes the surge in the commodities market is a bubble that will eventually deflate, especially as the Federal Reserve keeps hiking interest rates. "As interest rates go higher and higher," he said, "it makes it harder for these markets to continue their rise."
Investing in Gold (Au) is something I never understood. If I spent $6,000 on Gold 25 years ago, I guess I cold get my $6,000 back again today. Meanwhile, if I put that same $6,000 in a stock returning 12% at the same time, assuming a 2.3% inflation rate, I'd be looking at $102,000. If I only got an 8% annual return, I'd be sittin on $41,000.
I really like money, I like it a lot. One really can't have too much money; and as $102,000 or $41,000 is much more than $6,000; I just can't understand why anyone would invest in Gold.
Years ago I had a buddy who did some gold mining in the Sierra Nevada mountains and came up with 80 pounds of gold.Worth about $ 816,000 in 1980. He retired peacefully and invested his money in a little known company called Microsoft and some other stocks.
The etf in silver and gold will make these metals more attractive for investment.
The problems of storage and trading physical metal will have been done away with the etfs.
Cool.
I dumped Nazdog (America's South Sea bubble) in Feb., 2000.
Threw that cash into gold stocks for the hell of it.
It's looking real pretty.
Arrgghhh! Where's me parrot? Yo-ho-ho and a bottle of rum.
If your great-grandfather invested in Calumet & Hecla Mining Co. at $10,000 a share in 1910 and you inherited that stock today, you'd be broke.
Nothing like picking an investment and date to prove nothing.
"Arrgghhh! Where's me parrot? Yo-ho-ho and a bottle of rum" . . ."
Ahoy, Mate!
"Kaplan added that he believes the surge in the commodities market is a bubble that will eventually deflate"
Kaplan is an idiot. There is no bubble in gold commodities. Too few investors in this market.
I have 10% of my portfolio invested in gold and it's returned 200% since I bought in 2000. I expect to double that investment in the next two years and then triple or quadruple it by 2010.
When I hear that the shoeshine boy on the corner is buying gold stock, then I'll know we've hit a bubble and I'll sell.
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