GOLD MOVES PAST $900. TIME TO START HOARDING?

Gold Futures Top $900 as Dollar Drops; Platinum Jumps to Record

By Pham-Duy Nguyen

Jan. 24 (Bloomberg) -- Gold topped $900 an ounce in New York for the first time in a week after the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative investment. Platinum futures surged to a record.
European Central Bank officials signaled interest rates would remain steady to cap inflation. The Federal Reserve on Jan. 22 slashed the benchmark U.S. rate by 0.75 percentage point in an emergency move. Gold surged 31 percent last year as reductions in borrowing costs sent the dollar 9.5 percent lower against the euro.
``The biggest factor fueling the rally is going to be continued easing by the Fed while the ECB stands pat,'' said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. ``The dollar should keep on losing ground against the euro, so we should see another record in gold in the next two weeks, if not sooner.''
Gold futures for February delivery rose $24.80, or 2.8 percent, to $907.90 an ounce at 1:06 p.m. on the Comex division of the New York Mercantile Exchange. The price earlier soared as high as $911.10. Before today, gold gained 5.4 percent this month, reaching a record $916.10 on Jan. 15.
The dollar fell to the lowest ever against the euro last year as a housing slump and losses in the subprime mortgage market forced the Fed to reduce borrowing costs 1 percentage point. In 2007, the ECB raised rates 0.5 percentage point to 4 percent.
The euro rose as much as 0.8 percent to $1.4742 today, and European equities had the biggest gain since 2003 after U.S. stocks rebounded yesterday.

Interest-Rate Futures

Interest-rate futures had indicated a 100 percent chance the Fed will reduce the overnight lending rate to 3 percent from 3.5 percent on Jan. 30. The odds later fell to 70 percent.
``Clear expectations that the Fed will cut once again next week, and cut until some signs of stabilization emerge, continue to fuel the precious metal,'' said Jon Nadler, an analyst at Kitco Minerals & Metals Inc. in Montreal.

China reported its economy expanded more than 11 percent for the fourth straight quarter, easing concerns global economies may sag.
The UBS Bloomberg Constant Maturity Commodity Index of 26 prices rebounded, led by copper. The measure tumbled 3.5 percent in the previous two days, the most since mid-August.
``The markets sense more stability,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``The Fed is going to drop rates again, and that's going to hurt the dollar and help gold.''

Jewelry Demand

Still, higher prices may deter jewelers, the biggest buyers of the metal, GFMS Ltd., a London-based researcher, said last week in a report. A slowing economy might also damp demand by shoppers.
Jewelry demand accounted for 62 percent of purchases last year, and that may drop below 50 percent this year, sending the price to $800 by July, GFMS said. Demand from jewelers rose 5.5 percent in 2007 to 2,407 metric tons.
``A recession will hurt fabrication demand but will be more than made up for by investment demand,'' said Tom Winmill, president of the Midas Management Corp. in New York.
Investment demand in the StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 653 metric tons on Jan. 14. It rose 39 percent last year. The fund began trading in November 2004.

Platinum Soars

Platinum futures for April delivery surged $58.80, or 3.8 percent, to $1,617.90 an ounce on the Nymex, the highest ever. The previous record was $1,597.40 on Jan. 14.
Lonmin Plc, the world's third-biggest platinum producer, cut its sales target in the year ending Sept. 30 by 4.4 percent because of accidents and a strike in South Africa. Aquarius Platinum Ltd., which also mines in the country, said production in the second quarter ended Dec. 31 fell 2 percent.
Palladium futures for March delivery climbed $5.30, or 1.4 percent, to $374.75 an ounce. Before today, the metal dropped
2.3 percent this month.
Platinum and palladium are used to make jewelry and pollution-control devices in cars.
Silver futures for March delivery jumped 36 cents, or 2.3 percent, to $16.33 an ounce. Before today, the price gained 7 percent this month.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .

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