Capital Gold Group Report: Oil May Lead Gold to $1,500
SAN FRANCISCO (MarketWatch) -- Gold futures edged higher to trade near $923 an ounce on Wednesday, with weakness in the U.S. dollar and soaring oil prices set to extend a four-session winning streak that's already added 6% to the metal's price.
"Oil is obviously leading gold and if the historical gold vs. oil ratio
ever returns, we could see gold as high as $1,500," said Peter
Grandich, editor of the Grandich Letter.
"There's an inevitable
correction in oil but after a short while, we should see money plow
back in as oil, food and water shortages are going to make these
commodities in high demand for years to come," Grandich said in emailed
comments.
Gold for June delivery gained $2.60 at $922.80 an ounce
on the New York Mercantile Exchange. It climbed as high as $923.30
earlier in the session.
As of Tuesday, the contract logged a gain of $53.70 since the May 14 close at $866.50.
"After yesterday's rally, dips are likely to be viewed as buying
opportunities as energy price gains increase inflationary pressure,
while the interest rate differential between Europe and the U.S. keeps
the dollar under pressure," James Moore, an analyst at
TheBullionDesk.com, wrote in a research note.
On the currency
markets, the U.S. dollar fell against most of its major counterparts,
with the dollar index dropping 0.5% to 72.10.
Signs of resilient
business sentiment in Germany, Europe's largest economy, sent the euro
higher across the board, underlining speculation that the European
Central Bank will further delay any cuts in interest rates. The euro
rose 0.7% against the dollar.
Dollar weakness
typically benefits dollar-denominated commodities, such as gold and
crude oil, because it makes them cheaper for holders of other major
currencies.
Gold's appeal as an inflation hedge was also boosted by the surge in
oil prices, which broke through another key level on Wednesday, this
time topping $130 a barrel on the familiar fears that supplies can't
keep up with growing demand from emerging markets.
Also on the Nymex, July silver futures gained 4 cents at $17.765 an
ounce and July platinum rose $22.20 at $2,170. an ounce. June palladium
shed $2.85 at $447.40 an ounce, while July copper fell 3 cents to $3.75
a pound.
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