Today was a victory for precious metals, not a defeat

Section:

Gold prices push past $399 in Asia

By Allen Wan and Myra P. Saefong
CBS.MarketWatch.com
10:48p ET Sunday, November 16, 2003

TOKYO -- Gold prices pushed past the $399 an ounce mark
in Asia Monday on worries over the sliding dollar, the Iraqi
situation, and fears of rising inflation in the United States.

Spot gold prices rose as high as $399.50 before easing from
that level to trade around $397.40 by midday Tokyo.

Tokyo stocks plunged almost 4 percent Monday to below
10,000 on worries that a sliding dollar could hurt the country's
exporters. The dollar's resurgence coincided with gold's
retreat. The greenback fell to 108.26 yen in early Tokyo but
recovered to 109.36 yen by noon.

In New York Friday, gold futures closed just $2 short of the
$400-an-ounce level, and ended the week with a hefty 4
percent gain.

Sector trackers for the metals mining industry logged a
climb of as much as 7 percent for the week.

December gold climbed to a high of $399.40 an ounce Friday
on the New York Mercantile Exchange -- its highest intraday
level since March 1996. But the contract eased back a bit to
close at $398 an ounce -- that's still up $3.70 for the session
and well above the week-ago close of $383.40.

"This was the highest closing level for the week, month and
year," said John Person, head financial analyst at Infinity
Brokerage Services.

Gold's failure to touch the $400 level is "slightly
disappointing for those expecting to see it cross that level,"
said Person, but he sees the move as "a harbinger for even
higher price levels in the coming months ahead."

Gold bugs have waited 7 1/2 years to see $400, and prices
will most likely trade closer to $420 by the year's end, he
said.

Gold prices could even climb above that level next year if
the dollar continues to depreciate, he said.

Phil Flynn, a senior analyst at Alaron Trading in Chicago,
attributes gold's strength to "flight-to-quality buying" sparked
by weakness in the U.S. dollar, nervousness over recent
terrorism in Iraq, and signs of inflation with higher U.S.
producer prices.

Friday's economic data suggest that "producer prices are
rising while consumers are spending less," Person said.

"This can mean the Fed will be more apt to leave interest
rates lower for a longer period of time, which in turn will be
bearish for the U.S. dollar," he said.

Also Friday, poor auto sales held U.S. retail sales in check
in October, the Commerce Department said. Meanwhile,
U.S. factories slowed their output in October after a sharp
rise in the previous month, the Federal Reserve reported.

Following the news, the dollar gained ground against the
yen but weakened against the euro, and major stock indexes
traded mixed, translating into an uneven investment backdrop
for gold.

Grady Garrett, chief trading strategist at EnergyTrendAlert.com,
a commodity information provider, believes that economic
improvement will be more evident as the U.S. approaches the
holiday season, and that this in turn will "set the stage for a
resurgence of inflationary pressures."

"In the past Greenspan and company were quick to move to
halt inflation ... [but] the Fed has signaled that they are
focusing on the dangers of deflation," he said. This means
the Fed "will be more lenient with increasing prices during
the early stages of the recovery," he said, providing a positive
environment for gold demand.

The $400-an-ounce level may act as a warning sign for the
overall commodity market. It's a "psychological barrier," said
Flynn.

If prices close above that, the move will "signal something
more ominous [ahead] for commodities," he said. It could
mark "an era of tight supplies for all commodities," he said.

In other Nymex trading, silver futures moved higher after
falling in the previous session, to close at their highest level
since June 2000. December silver rose by 12 cents to close
at $5.415 an ounce.

Silver, which is seen as both a precious and an industrial
metal, has been benefiting from strength in both gold and
copper.

"Silver can rally further, but we doubt that much more than
$5.40 to $5.50 is on the cards," John Reade, an analyst
at UBS Investment Bank in London, wrote in a note to
clients.

December copper was also higher, rising 0.9 cent to close
at 95.15 cents a pound.

On the supply end, gold inventories stood at 2.96 million troy
ounces, down by 225 troy ounces as of late Thursday.

Silver stocks totaled 120.3 million troy ounces, up 607,230
from the previous session, and copper supplies were down
197 short tons at 293,873 short tons.

Platinum and palladium futures were mixed on Nymex.
December palladium closed up 65 cents at $203 an ounce,
while January platinum ended flat at $770.80 an ounce.

Metals-mining shares moved higher on the strength in gold,
silver and copper. Indexes for the sector ended the week
with gains of as much as 7 percent.

The Philadelphia Gold and Silver Index rose by 0.9 percent
to close at 102.2 -- a fresh six-year high, and the CBOE
Gold Index added 0.5 percent to close at 84.43. Both
indexes closed up 4.9 percent for the week.

The Amex Gold Bugs Index rose by 1.5 percent to end at
225.94. For week, it was up 7.4 percent.

Among the sector's biggest gainers, shares of Coeur
d'Alene Mines tacked on 41 cents, or 10.6 percent, to close
at $4.29, while Bema Gold added 23 cents, or 6.6 percent,
to end the session at $3.73.

Ashanti Goldfields closed at $12.60, up 28 cents, or 2.3
percent. AngloGold and Ashanti said Friday that they've
agreed to extend to Dec. 12 the expiration date on their
$1.5 billion merger deal to allow AngloGold and the
government of Ghana time to finalize agreements related
to the transaction.

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