Gold tops $1,000 US an ounce

Gold tops $1,000 US an ounce
Thursday, March 13, 2008 | 4:15 PM ET CBC News

The price of an ounce of gold on Thursday topped $1,000 US for the first time, on a volatile day for world currency, commodity and equity markets.

Gold hit a peak of $1,001.50 US before pulling back. The precious metal finished the trading session on the New York Mercantile Exchange at $993.80 US an ounce, a gain of $13.30 US from Wednesday's close.

The price of the precious metal has gained more than 20 per cent this year and has doubled in the last three years.

Analysts say the stars have aligned for gold.

"Fundamentally, investors are desperate to invest in hard assets like gold as other asset classes face extreme pressure," said Camilla Sutton, a currency strategist at Scotia Capital.

"With the U.S. economic backdrop deteriorating by the day and inflation remaining an ongoing threat, gold makes an ideal investment as it protects against both," she told CBC News.

Sutton said the outlook for gold over the next year "remains bullish," but cautioned that "gold will most certainly take a break at some point from this majestic run."

U.S. dollar hits all-time low against euro

Gold is seen as a safe haven for investors looking for assets that will hold their value in times of steady drops in the worth of the U.S. dollar.

The U.S. currency hit a 12-year low against the Japanese yen and hit another record low against the euro Thursday.

Thursday's U.S. dollar drop was blamed on news that a pair of big funds were facing serious problems that could lead to the liquidation of billions of dollars of investment holdings.

"This will likely become known as the 'Carlyle/Drake rally' (or cave-in, depending on your preference)," wrote Montreal gold analyst Jon Nadler, referring to the market-shaking woes of funds controlled by Washington-based Carlyle Group and New York-based Drake Management.

"The imminent doom of the bond fund and probable demise of the hedge fund sent icy shivers through the financial markets," Nadler, a senior analyst for Kitco Bullion Dealers, said in a morning commentary.

The Carlyle Group fund said late Wednesday it expected creditors would move to liquidate the remainder of the fund, which has more than $16-billion US worth of residential mortgage-backed bonds.

Analysts say each revelation of further losses related to fallout from the U.S. subprime mortgage mess will likely force the U.S. dollar down more.

Many experts say the U.S. economy already appears to be in recession and that view was bolstered Thursday by news that U.S. retail sales in February fell from January's levels — another sign that U.S. consumers are pulling back on spending.

Canadian dollar driven up

The weakness in the U.S. dollar, combined with the strength in gold and oil prices, helped to boost the Canadian dollar by 0.47 of a cent to $1.0146 US.

Oil, which has recently been rising in tandem with gold, set another record high Thursday. It traded as high as $111 US a barrel before finishing at $110.33 US.

Equity markets in Europe and Asia finished in the red, while North American markets recovered from early losses to reach positive territory.

The S&P/TSX composite index erased a triple-digit loss to finish up 146.15 points at 13,443.50. Toronto was led higher by a 3.5 per cent gain for the gold sub-group.

On Wall Street, the Dow Jones industrial average added 35.50 points to conclude the day at 12,145.74.

Hong Kong's Hang Seng Index shed 4.8 per cent to at 22,301.64, while the Japan's Nikkei Stock Average gave up 3.3 per cent to close at 12,433.44 points.

European markets made some late day recoveries but still finished lower. In London, the FTSE-100 lost 1.45 per cent. Germany's DAX index shed 1.5 per cent, and France's CAC 40 was also off by 1.42 per cent.