NEW YORK (MarketWatch) — Gold futures briefly broke the psychologically important level of $1,000 an ounce Thursday, propelled by ongoing dollar weakness and bleak news from the financial sector.
Gold soared as high as $1,001 an ounce on the New York Mercantile Exchange.
Gold for April delivery was last up $17.50 at $998 an ounce.
“Gold prices looked set to finally achieve the $1,000 mark this morning, as background market conditions shifted from bad to worse overnight,” said Jon Nadler, senior analyst at Kitco Bullion Dealers, in a research note.
“This will likely become known as the Carlyle/Drake Rally,” Nadler said. “The imminent doom of the bond fund and probable demise of the hedge fund sent icy shivers through the financial markets that way overshadowed the (brief) cheer we witnessed following the Fed’s term facility plan the other day.”
On Wall Street, U.S. stocks dropped sharply after a fund managed by the Carlyle Group admitted it’s close to collapse and as statistics showed a decline in retail sales, dragging the dollar to a 12-year low against the Japanese yen.
Carlyle Capital, the bond fund affiliated with private equity firm The Carlyle Group, is on the verge of collapse after failing to agree a new financing deal with lenders. The fund said late Wednesday that it expects lenders will soon take possession of “substantially all” its remaining assets after it was unable to meet surging margin calls on its portfolio of residential-mortgage-backed securities.
Adding to the bad news from the financial sector, Drake Management LLC, a hedge-fund firm run by Anthony Faillace and Steve Luttrell, is mulling options that include shutting its largest fund after losses and redemption requests from some investors, according to a letter sent to clients Wednesday.
Renewed fears of financial turmoil sent the U.S. dollar plunging, with the greenback temporarily falling through the psychologically key 100-yen level.
The gold market is boosted by “dollar weakness, extreme concern over the market and a continued bid by funds that are taking the Fed money they are given and speculating with it vs. lending it,” said Zachary Oxman, a senior trader at Wisdom Financial.
“This is just the start of things, and if the government continues to give away money and torpedo the dollar, gold will do nothing but move higher,” Oxman said.
On Tuesday, the Federal Reserve and other leading central banks doubled to more than $400 billion the amount of money they’re willing to lend to banks and bond dealers, hoping to flood dysfunctional credit markets with enough money to get them working again.
In more bleak economic news Thursday, the Commerce Department reported that consumer spending weakened again in February as U.S. retail sales fell 0.6%.
Most kinds of retail stores reported lower seasonally adjusted sales in February even before the impact of inflation was counted. The figures were weaker than expected by Wall Street economists, who forecast no change in retail sales.
Also on the Nymex, May silver rallied 86 cents, or 4.3%, at $20.86 an ounce.
April platinum soared $30 to $2,100 an ounce and June palladium gained $2.10 to $513 an ounce. May copper edged up 1 cent to $3.85 a pound.
Crude-oil futures edged lower after surging to a record high of $110.70 earlier in the session, with U.S. dollar weakness continuing to underpin oil prices.
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