Gold rose in Asia and Europe today, touching last week's highs of $688 per ounce before whipping in a 0.5% range in US trade.
In Sterling, gold touched £350 – its highest level since late July. Versus the Euro, gold is now trading at €521 per ounce, also a 7-month high.
"The oil market and the general strength of commodities are helping gold," says Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. "Longer-term, there are still inflation concerns."
Gold is expected to rise this week by 20 out of 27 finance professionals interviewed worldwide by Bloomberg. Overnight in Tokyo gold for Dec. delivery hit a new two-decade high for the third day running, up above $692 per ounce.
Pundits and traders alike point to political pressures in the Middle East pushing gold higher. In Tehran this weekend, President Mahmoud Ahmadinejad said that Iran has "no brake and no reverse gear".
US Secretary of State Condoleezza Rice immediately said Tehran needs to find the "stop button".
Now the five permanent members of the UN Security Council meet in London today to discuss sanctions against Iran over its nuclear enrichment program.
"With elements of anti-inflationary hedge back on the agenda," adds Darren Heathcote of Investec Australia, "coupling that with those geopolitical tensions in Iran and Iraq, I think that has helped to push gold through new technical levels...
"There's a lot of verbal rhetoric on Iran," said another trader to Reuters. "It will
certainly stop people going short in the [gold] market."
Crude oil continues to trade above $60 per barrel. And data due this week from Washington is expected to show inflation remains a worry for US investors – but the Fed is unlikely to raise interest rates in response.
"US consumer confidence for February, due tomorrow, is expected to fall," reports the Financial Times. "Thursday brings the Fed's preferred inflation measure – the core personal consumption expenditure deflator...
"[It's] expected to rise from 2.2% in Dec. to 2.3% in Jan."
"Retail investors apparently trust in the yellow metal," reports Hereaus, the German refining company today. "Banks and traders in Germany report that they see good buying in both coins as well as bars.
"We cannot rule out an initial consolidation, [but] all in all the up-trend remains intact."
The professional market is also backing gold to go higher. The commitment of traders report in the US says that non-commercial gold traders – i.e. speculators – grew their net long position by 4% last week.
Overall, open interest in the metal rose by 3.3%.
"The short-term outlook is still bullish," reckons Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"But I think we will see a big drop one day. The market is [too] long [of gold]."
One group of gold owners is bucking the trend by selling into this rally, of course. "European central banks continued their sales in the last week," notes Hereaus, "selling around 5.5 tonnes of gold...
"The ECB reported that the sales were conducted by two of its member banks and were in line with the 2004 Central Bank Gold Agreement."
But outside the developed West, central banks are now looking to buy gold says Julian Phillips of The Gold Forecaster.
For his latest report – including news on China's likely gold policy in 2007 – click here now...