Gold Rally on Record Oil
By Polya Lesova
Gold futures rallied
2% Wednesday, as oil's surge to a new all-time
record and weakness in the U.S. dollar boosted
demand for the precious metal.
Gold for June delivery soared $19.50 to finish
at $937.50 an ounce on the New York Mercantile
"Crude surging and the drop in the dollar are
creating the rallying cry for gold today," said
Burton Schlichter, director of trading at New
The surprising drop in crude inventories "has
pushed crude over the old March highs, which in
return is giving gold a boost," he said. "If
crude continues to surge, gold will go along for
'Crude surging and the drop in the dollar are
creating the rallying cry for gold today.'
— Burton Schlichter, New World Trading
Crude-oil futures rallied to a new record of
$112.21 a barrel Wednesday after government data
showed that crude supplies declined by 3.2
million barrels during the week ended April 4.
Analysts surveyed by Platts had been looking for
an increase of 2.7 million barrels.
Crude for May delivery rose $2.37, or 2.2%, to
close at $110.87 a barrel.
"The backdrop of economic fears in the U.S.,
energy-related inflationary pressures and
ongoing credit issues continues to draw
investment interest from those looking longer
term," said James Moore, an analyst at
TheBullionDesk.com, in a research note.
The dollar extended losses against the yen and
the euro as stocks withered on Wall Street and
investors awaited a policy decision from the
European Central Bank. The dollar index, which
tracks the performance of the greenback against
a basket of currencies, dipped 0.7% to 71.79.
The European Central Bank is expected to hold
its key rate steady at 4%, but maintain its
focus on price stability and worries about
On Tuesday, gold fell $8.80 an ounce. The
International Monetary Fund said it would seek
approval to sell more than 14.2 million ounces
of its gold reserves, currently valued at more
than $13 billion. See full story.
GFMS sees $1,100 gold possible this year
The price of gold can very well reach $1,100 an
ounce this year or early 2009, London-based
consultancy GFMS Ltd. said in its latest survey
of the gold market.
While gold, along with other metals and overall
commodities, have experienced a correction in
prices in recent weeks, GFMS expects the ongoing
credit crisis to continue fueling investment
"We weren't at all surprised that the market saw
a hefty correction in the last few weeks, as the
speed of the earlier gains looked a little
unsustainable," said Philip Klapwijk, executive
chairman of GFMS, in the report issued
"However, we don't think current hesitancy means
it's game over for the rally," Klapwijk said.
Other metals futures also gained on the Nymex
Wednesday. May silver futures surged 49 cents to
end at $18.20 an ounce and July platinum futures
rose $15 at $2,044.60 an ounce. June palladium
gained $5.80 at $463.20 an ounce.