Spot gold surged to a lifetime high on Friday in holiday-thinned trade, hitting a record for a sixth consecutive session on a weak dollar and factors ranging from geopolitical uncertainty to inflation concerns.
Silver also raced to its loftiest in 31 years, notching the milestone for a seventh straight day and outstripping gold's weekly gains by a huge margin.
A prolonged euro zone sovereign debt crisis, unrest in the Middle East and North Africa, rising global inflation, and most recently worries over the fiscal stability of the United States and a sharply weaker dollar have fueled the record-breaking rally in these precious metals.
Spot gold rose to a record of $1,510.80 an ounce, before easing to $1,507.10 by 0710 GMT, on track for a weekly gain of 1.6 percent -- its sixth consecutive week of gains.
Spot silver hit a 31-year high at $46.69 an ounce, on course for a weekly rise of 8.4 percent, its biggest weekly increase in two months.
Silver has gained 51 percent so far this year, and gold 6 percent. This compares with a corresponding rise of just 1 percent in the London Metal Exchange price of copper, the bellwether of the industrial metals complex.
So long as the overall environment remains supportive and the dollar remains weak, gold is expected to remain strong, but a correction might be on the horizon after the rapid ascent, traders and analysts said.
The dollar index , which measures the greenback against a basket of currencies, was languishing near a three-year low, and could take a run at the all-time low hit in 2008, pressured by record low interest rates and the crushing weight of the U.S. budget deficit.
"Gold is likely to consolidate around the $1,500-level next week," said Li Ning, an analyst at Shanghai CIFCO Futures. "The angle of the recent rally is very sharp, and we are bound to see some correction in the near term."
MORE STEAM TO RUN ON?
Spot gold has rallied more than $50, or nearly 4 percent, in the past seven sessions. The Relative Strength Index, or RSI, rose to nearly 75, a level unseen since October last year, suggesting the market has been heavily overbought.
The RSI on spot silver climbed close to 89, its highest since April 1987.
The gold market may have topped out, and now is the time to sell while there are still people willing to buy, said Barry Schwartz, vice president and portfolio manager at Toronto-based wealth manager Baskin Financial Services.
Shanghai CIFCO's Li said gold still has more steam to run on and expected prices to peak at $1,550 by the end of the second quarter, buoyed by Middle East unrest, sovereign debt concerns on both sides of the Atlantic and inflation worries.
Concerns over rising global inflation are likely to drive gold even higher in the next few years, albeit at a slower pace, analysts polled by Reuters said.
The Shanghai Gold Exchange has started a trial for over-the-counter trading, providing a convenient tool for institutional clients to trade large quantities of gold.
Holdings in the physically backed exchange-traded precious metals funds dipped ahead of the long Easter weekend. SPDR Gold Trust , the world's biggest gold ETF, saw holdings dip 0.6 tonnes to 1,229.643 tonnes.
Financial markets in Singapore and Hong Kong are closed on Friday for a public holiday, and Hong Kong will remain closed on Monday.
Source: www.moneycontrol.com
Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd
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