Gold futures closed above $700 an ounce for the first time since May 2006 on speculation that further declines in the dollar would boost the appeal of the precious metal as an investment.
Five of the last six bear markets for the U.S. currency pushed the price of gold higher. The metal’s price has climbed 10% this year, and the dollar has fallen 3.6% against the euro.
“The primary catalyst for the next leg up in gold is the dollar,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “In light of a potential interest rate cut, people are expecting the dollar to head lower, and that’s a reason to buy gold.”
Gold futures for December delivery, the most actively traded gold contract, rose $13.90, or 2%, to $704.60 an ounce on the Comex division of the New York Mercantile Exchange, the highest close since May 12, 2006.
The September gold futures contract rose $13.90 to $695.60.
Stock prices of precious metal producers also advanced. The Philadelphia Stock Exchange gold and silver index climbed 5.7%, while the Amex Gold Miners index rose 6.9%. Each index’s gain was its biggest since June 2006.
Shares of Toronto-based Barrick Gold Corp. jumped $2.80, or 8.4%, to a record $36.20. Denver-based Newmont Mining Corp. jumped $1.81, or 4.3%, to $44.10, its highest close since April.