Gold Futures Prices Rise to 5-Year High

Gold futures prices surged Thursday to their highest level in five years as global political jitters and a weak dollar put the metal’s 2002 safe-haven rally back on track.

Near-term gold futures on the Commodity Exchange jumped $6.60 to $331.40 an ounce, the highest closing price since 1997. The price is up 19% this year, from $279 at the end of 2001.

By contrast, the Standard & Poor’s 500 stock index is down 21.5% this year.

Silver futures also gained Thursday, with the December contract rising 11 cents to $4.74 an ounce. But silver is up just 3.5% this year.

Thursday’s move broke gold out of recent ranges and came as the dollar fell and amid several scary news reports, including one that Iraq may have sold Islamic extremists a chemical weapon.

“It’s just an accumulation of everything,” James Moore of TheBullionDesk.com said. “The market has generally started to turn a bit bullish.”

Investors also piled into gold-mining stocks, which many prefer to handling the cumbersome physical commodity.

Barrick Gold gained 63 cents to $15.75, Agnico Eagle jumped $1.04 to $13.73, Newmont Mining surged $1.11 to $28.11 and Glamis Gold gained 77 cents to $10.09.

As of last week, the average gold-stock mutual fund was up 47% year-to-date, according to fund tracker Morningstar Inc. By contrast, the average general U.S. stock fund was down 19%.

Markets were rattled Thursday after the Washington Post reported that Bush administration officials said the White House has a credible report that militants linked to Al Qaeda received a chemical weapon in Iraq in late October or November.

Also, North Korea said Thursday that it was reactivating a mothballed nuclear power plant at the center of a suspected 1990s weapons program in response to a U.S.-led decision to suspend oil aid to the country.

This follows unsettling news Wednesday that the Bush administration warned Iraq and other countries that the United States was prepared to use nuclear weapons to respond to an attack from weapons of mass destruction.

Meanwhile, the weakening dollar also bolsters gold’s appeal because the dollar effectively competes with gold as a safe-haven account.

In New York, the dollar slumped Thursday against the euro, with the latter nearing $1.02, its strongest level against the U.S. currency since early 2000. The euro has rallied from 99.2 cents on Nov. 25.

“Our gold business is up 15% to 20% over last year,” Harvey Stack, an owner of Stack’s Coin Co. in New York, told Bloomberg News. “People are buying gold because they feel that other investments won’t hold their value as well.”

Monthly sales of American Eagle gold coins have averaged 38,200 ounces since July, more than triple the average of 11,920 ounces during the first six months of the year, according to figures on the U.S. Mint’s Web site, Bloomberg News reported.

Gold had been stuck in a range of $310 to $330 since late May. Now, traders’ attention has shifted to the $340-to-$350 range. That is expected to be a tough hurdle for the metal.

But continuing programs at major gold companies to unwind contracts they used to “forward sell” future production at a set price are continuing to bolster sentiment, experts say. Canada’s Placer Dome on Wednesday reaffirmed its commitment to reducing its so-called hedge book.

When mining companies balk at pre-selling future production, it shows they expect prices to rise.

Newmont Mining said last month that it reduced such forward sales by 928,000 ounces, to 5.8 million ounces, during the third quarter. The company said it expected an additional reduction of at least 279,000 ounces in the current quarter, according to Bloomberg News.