TOKYO (Reuters) - Gold prices shot up more than 3 percent to fresh record highs as investors stepped up buying of the yellow metal, whose luster has increased due to the dollar's weakness and deepening U.S. financial woes.
By Miho Yoshikawa
TOKYO (Reuters) - Gold prices shot up more than 3 percent to fresh record highs as investors stepped up buying of the yellow metal, whose luster has increased due to the dollar's weakness and deepening U.S. financial woes.
JPMorgan Chase & Co said on Sunday it would acquire stricken rival Bear Stearns for just $2 a share in an all-stock deal that values the U.S. investment bank at about $236 million.
The news sent the dollar tumbling to a record low against the euro as investors worried that there would be more casualties in the widening U.S. financial crisis.
!ADVERTISEMENT!The Fed cut its discount rate on Sunday and opened up discount window lending to major investment banks, a tool not used since the Great Depression, in a sign of its deep concern over the current crisis.
"This morning's moves by the Fed clearly tell how serious the situation is in the United States. Gold is drawing a lot of safe-haven demand as you can't buy stocks or currencies because of this volatility," said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd.
Gold's attraction as an alternative investment has helped boost the precious metal's price by more than 20 percent this year alone, as it hit successive record highs along the way.
It gained 32 percent in 2007.
"Flight-to-quality buying is boosting gold as the market is losing faith in the dollar," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.
Financial jitters also propelled crude oil to a record above $111 a barrel on Monday, with crude for April delivery climbing as high as $111.42.
Gold hit $850 an ounce in January 1980, lifted by a combination of high inflation linked to strong oil prices, the Soviet invasion of Afghanistan and the impact of the Iranian revolution.
After adjustment for inflation, the 1980 high is equivalent to $2,119.30 an ounce at 2007 prices, according to precious metals consultancy GFMS Ltd.
As of 0315 GMT, spot gold had risen as high as $1,030.80 per ounce, up more than 3 percent from Friday when it hit a record $1,007.10.
It traded at $996.90/997.70 late on Friday in New York.
Some of the gains were trimmed and spot gold was trading at $1,026.10/1,026.90 at 0544 GMT (1:44 a.m. EDT).
Gold was expected to head even higher as the dollar deepened its slide against both the euro and the yen.
"The market is completely bearish on the dollar. The market is also very pessimistic about the dollar's outlook," Kageyama said.
The dollar plunged 3 percent against the yen on Monday to hit a 13-year low below 96 yen on fears that there would be other casualties to the fast-spreading credit crisis that claimed U.S. investment bank Bear Stearns.
The euro vaulted to a $1.5905 on trading platform EBS, up 1.5 percent on the day.
"Probably gold is the only decent asset you can hold. You simply cannot go short in gold now," Mitsubishi's Sugata said.
The most active gold contract for April delivery on the COMEX division of the New York Mercantile Exchange rose as high as $1,033.90 per ounce, up more than 3 percent from its New York close of $999.50, when it climbed $5.70. It later trimmed gains and inched down to $1,025.30.
Gold futures had marked a then record high of $1,009 on Friday.
The yen's strength against the dollar, however, weighed on precious metals prices on the Tokyo Commodity Exchange.
The key February 2009 gold contract on the Tokyo Commodity Exchange was down 16 yen per gram, or 0.5 percent, at 3,222 yen at 0547 GMT.
The metal was off the day's low of 3,200 yen.
Platinum rose to $2,100/2,110 an ounce, compared with $2,070/2,080 in New York late on Friday.
Palladium inched down to $504/510 an ounce compared with $509/514.
Silver climbed to $21.17/21.22 an ounce from $20.64/20.69 in New York trading. TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.
(Reporting by Miho Yoshikawa and Chikafumi Hodo)
