31
Dec

Whos crazy now?

   Posted by: RobPatton   in Money

LONDON (Reuters) — Gold posted its biggest yearly gain since 1979 in 2007, even though prices dipped Monday.

Gold futures for February on NYMEX’s COMEX metals division closed down $4.70 at $838 an ounce. For the year, gold was up 24%.

The spot price of gold bullion rose around 30% on the year, its biggest annual gain since 1979, and was less than $20 from hitting record highs. Spot price is what it wold cost to buy an ounce of gold right now.

“For gold, this marks the sixth consecutive year of positive returns and consequently represents the longest gold price rally in history,” Deutsche Bank said.

In the past days, the metal gained on speculative buying driven by dollar weakness and tensions in Pakistan following the assassination of opposition leader Benazir Bhutto.

“Certainly we are looking for a test of $850 very early in 2008. All the supportive factors are still there. The dollar is very much under pressure and we have got geopolitical tensions,” said James Moore, precious metals analyst at TheBullionDesk.com.

“There is going to be some reallocation of money next year and certainly gold is going to get a favor, as a market to move 30% in one direction is going to raise attention.”

Gold was fixed at a record high of $850 in January 1980 on high inflation linked to strong oil, Soviet intervention in Afghanistan and the effects of the Iranian revolution.

After adjusting for inflation, that level was equal to $2,079 at 2006 prices, according to industry estimates.

The latest safe-haven buying was sparked by Bhutto’s killing last week, which plunged Pakistan into crisis.

“Gold spiked to fresh highs on escalating geopolitical tensions, tightening oil supplies and a weakening dollar, which seem to stack the deck in favor of further upward movement,” said Pradeep Unni, analyst at Vision Commodities in Dubai.

The dollar fell vs. a basket of major currencies, keeping it on track for its worst annual performance in four years, as investors speculated that 2008 could bring slower U.S. economic growth and lower interest rates.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Other commodities from energy to metals to agriculture saw their largest annual gains in at least a decade.

U.S. copper for March settled down 3.10 cents at $3.0410 a lb on COMEX. For the year, it was up about 8%.

In agricultural products on the Chicago Board of Trade, soybeans for January were down 8-3/4 cents at $11.99 a bushel. On the year, the market showed a gain of more than 60%.

Analysts said early indications for 2008 are that growth in China and other emerging markets will keep demand for raw materials bubbling, while trouble in nuclear-capable states like Pakistan could send oil and gold to record highs.

Copyright 2008 Reuters Limited.

This entry was posted on Monday, December 31st, 2007 at 10:09 pm and is filed under Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a reply

You must be logged in to post a comment.