New York – Gold prices surged Tuesday above $700 an ounce – a level not reached since 1980 – as funds bought into the market, driven by weakness in the dollar, political tension in the Middle East and overall upward momentum in the commodities markets.
These persistent factors have been pushing gold prices to multi-decade records for months. Gold has risen 40 percent since late November, when for the first time in two decades the most active contract broke through $500 an ounce.
Surpassing $700 an ounce “is important, insofar as it reinforces the overall uptrend of the market. There are people looking for much, much higher,” said Bernard Hunter, director of precious metals at Scotia Mocatta, a division of the Bank of Nova Scotia.
Hunter said prices likely will consolidate at this level, then once again start heading higher. Some market watchers expect gold to breach the $1,000-an- ounce mark.
June gold futures on the New York Mercantile Exchange rose to a peak of $702.20 an ounce Tuesday before settling at $701.50 an ounce, up $21.60 on the day.
If gold continues rising into the coming weeks, it will mark the first time the yellow metal has spent significant time trading above $700. The all-time record, set in January 1980, was $875 an ounce, but it was reached in a huge day-and-a-half surge, and then gold futures fell “back under $700 before you could blink an eye,” said Peter Grandich, who writes the mining and metals-markets commentary The Grandich Letter.
Now, “all the lights look green for gold. … From this point forward, after the excitement, we could see a correction. But it will only be a correction. It will not be the end of this run,” Grandich said.
The main factors contributing to funds’ recent interest in buying gold futures are geopolitical worries, mining hindrances and a falling dollar, which typically encourages investors to turn to gold, considered a safer alternative to the U.S. currency.
“Surprisingly, the one factor that’s really absent from this is normal physical demand,” Hunter said. He noted that aside from small pockets of higher consumer demand for gold, such as during the Indian wedding season, demand has been fairly steady.
Like gold
How Colorado gold-mining stocks fared Tuesday:
Newmont Mining 4.0%
Close: $57.93
Royal Gold 8.5%
Close: $34.06
Golden Star 6.9%
Close: $3.68
Vista Gold 6.9%
Close: $9.35
Apollo Gold 4.8%
Close: $0.65
US Gold Corp. 2.3%
Close: $8.85
