Mon Jan 28, 2008 5:12 PM GMT
By Atul Prakash and Veronica Brown
LONDON, Jan 28 (Reuters) – Gold and platinum sailed to record highs on Monday, boosted by dollar weakness and a power crisis in major producer South Africa that derailed output. The rise in precious metals also pulled silver to a 27-year high..
Spot gold hit a historic $929.20 per ounce before paring gains slightly to stand at $927.50/928.40 an ounce by 1659 GMT, against $913.00/914.00 late in New York on Friday.
The dollar fell versus the euro, making bullion priced in the U.S. currency cheaper for non-U.S. investors, as markets anticipated the U.S. Federal Reserve’s policy meeting this week.
Markets are betting that the Fed will cut interest rates by as much as 50 basis points after the two-day policy meeting ending on Wednesday, following last week’s hefty 75-basis-point cut in a rare move between scheduled meetings.
Those expectations were heightened after data showing weaker than expected U.S. new home sales in December.
On the fundamental front, South African mining companies hope to resume production later this week after being allowed to carry out underground maintenance work in mines across the country that have been crippled by a power crisis.
“We now actually do have a compelling fundamental story on precious metals, due to South Africa and the rest of the African subcontinent,” said Lars Steffensen, managing director of commodity trading at Ebullio Capital Management.
“I would say that with this rally, 50 percent of it is a dollar story because of the interest rate cuts and 50 percent is a fundamental story,” he added.
In other bullion markets, U.S. gold futures sustained gains, with the most active February contract hitting a record $929.80.
With the dollar’s fall and U.S. recession fears persisting, analysts said safe-haven sentiment for gold remained positive. . .