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Gold Nears 16-Year Highs
By Veronica Brown
10-25-4
 
LONDON (Reuters) - Gold was within reach of its highest level in nearly 16 years on Monday, fired by a resurgent euro and inflationary fears fanned by sky-high oil prices, dealers and analysts said.
 
"I don't think we've seen anything yet," Ross Norman of TheBullionDesk.com told Reuters in a telephone interview.
 
"With the euro where it is, oil where it is and tension ahead of the U.S. election I think we could see another attempt at $430.50 and it might just poke through," he added.
 
Bullion, which hit a 15-year peak on January 6 at $430.50, has traded steadily higher this year, extending a bull cycle that has stretched out since 2001 when prices fell towards $250.
 
Having struck a fresh six-month peak earlier on Monday at $430.20 per ounce, dealers said fund buyers would try and push for the January 6 peak and beyond to levels last seen in 1988, emboldened by a rampant euro making the metal more attractive.
 
The market's upswing has been influenced by a weaker dollar, geo-political uncertainty, producers buying back previously sold forward production and sky-high oil prices fanning inflationary worries.
 
"Oil is playing a part but the dollar is the big mover in gold," Peter Hillyard, head of European metal sales at ANZ Bank, told Reuters. He spoke after benchmark U.S. light crude set a fresh peak of $55.67 a barrel.
 
"The market believes $430-plus (for gold) will be penetrated and, depending on who you talk to, there are people saying $500. I think that's a little overdone," he added.
 
The euro rose on Monday to within once cent of record highs against the U.S. dollar hit in February.
 
Record oil prices and worries about the widening U.S. current account deficit have hit the dollar -- making gold less expensive for non-U.S. investors.
 
The rising price of gold was not expected to have an immediate impact on jewellery prices.
 
Even though analysts had noted the supportive factors behind gold's drive up, they also raised concerns about massive speculative exposure which could spark a sharp sell-off further out.
 
Commitments of Traders data, issued by the Commodity Futures Trading Commission and showing how much of the metal speculators have bought, showed the net speculative long position in New York's COMEX gold futures market rose to 120,914 contracts as of October 19, from 115,137 contracts on October 12.
 
"Gold is set to break the year high of $430.50 on dollar weakness -- but there is little else behind the move at the moment. Speculators appear to be fully loaded, or very nearly so," John Reade of UBS investment bank said in a daily report.
 
"For investors looking for a play on dollar weakness there are probably lower-risk alternatives available."
 
Copyright 2000 Reuters Limited.

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