Gold Futures Trade Above $700, Their Highest Level Since 1980
Gold prices touched $700 an ounce Tuesday -- a level not reached since 1980 -- as investment funds bought into the market, driven by weakness in the dollar, political tension in the Middle East and overall upward momentum in the commodity markets.
The same factors have been pushing gold prices to multidecade records for months. The metal has risen 40% since late November, when for the first time in two decades the most active contract surpassed $500 an ounce.
Gold futures traded above $700 an ounce Tuesday before closing at $699.40, up $21.60.
Topping $700 an ounce “is important, insofar as it reinforces the overall uptrend of the market. There are people looking for much, much higher,” said Bernard Hunter, director of precious metals at ScotiaMocatta, a division of Bank of Nova Scotia.
Hunter said prices probably would consolidate at this level, then resume heading higher. Some market watchers are expecting gold to breach the $1,000-an-ounce mark.
If gold does continue rising in the coming weeks, it will mark the first time the metal has spent significant time trading above $700. The all-time record, $875 an ounce, was set in January 1980 after a huge day-and-a-half surge. Gold futures then fell “back under $700 before you could blink an eye,” said Peter Grandich, who writes about the mining and metal markets.
Now, “all the lights look green for gold.... From this point forward, after the excitement, we could see a correction. But it will only be a correction. It will not be the end of this run,” Grandich said.
The main factors contributing to funds’ recent interest in buying gold futures are geopolitical worries, production problems at some mines and a falling dollar, which typically encourages investors to turn to gold, considered safer than the U.S. currency.
“Surprisingly, the one factor that’s really absent from this is normal physical demand,” Hunter said.
He noted that aside from brief periods, such as during the Indian wedding season, consumer demand for gold has been fairly steady.
Gold futures broke through the $600-an-ounce level for the first time since 1980 on April 6.
