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Gold Futures Top $600 an Ounce

Posted on: Thursday, 6 April 2006, 15:00 CDT

By MADLEN READ

NEW YORK - Gold futures climbed Thursday to more than $600 an ounce for the first time in 25 years, as other surging commodities, especially in the energy markets, stoked investors' inflation concerns.

On the New York Mercantile Exchange, June gold futures, the most active contract, rose to a high of $601.90 an ounce Thursday in Asian trading. Later in midday trading in New York, the contract eased back to $598.30 an ounce as traders took profits, but was still up $5.90 from late Wednesday.

Spot gold was $1.90 higher at $587.90 an ounce on Nymex at midday in New York.

Gold prices have been pushed higher by the strength in other commodity prices, such as oil and silver, which has seen surging interest in recent weeks due to an upcoming silver exchange-traded fund planned by Barclays Global Investors.

May silver was up 27 cents to $11.975 at midday on the New York Mercantile Exchange.

Meanwhile Thursday, crude-oil futures rose 58 cents to $67.65 in midday trading on the New York Mercantile Exchange.

"Commodity prices have been rocketing so it would seem perverse if gold didn't too," said Clem Chambers, CEO of financial data Web site ADVFN, in a note. "With insufficient supply to meet consumption, with uncertain political developments in the Middle East, with inflation worries slowly but surely increasing and with emerging markets, who are historically strong buyers of gold, also booming; it is hardly surprising that gold is rising."

According to Leonard Kaplan, president of Prospector Asset Management, there hasn't been a close correlation between energy prices and gold prices for a long time, but the rationale is that rising energy prices will cause inflation, and inflation boosts precious metals.

"It's money chasing money," he said, adding that commodities across the board, from copper to zinc to sugar, have seen big increases without any fundamental reason. "Money is pouring into them simultaneously, without cause or concern or interest in what the values are, or what it's going to be used for. It's all momentum - it's the flavor of the year."

It's impossible to say how high gold prices will rise, but many market watchers are saying they could easily surpass the record of about $800 an ounce, and some even say $1000 is a possibility.

"While few will predict $1000 an ounce, few would bet against it," Chambers noted.

"As more and more people pour more and more money into commodities," Kaplan said, "it could go anywhere."

But Kaplan added that he believes the surge in the commodities market is a bubble that will eventually deflate, especially as the Federal Reserve keeps hiking interest rates. "As interest rates go higher and higher," he said, "it makes it harder for these markets to continue their rise."

Source: Associated Press/AP Online

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