Sunday, March 23, 2008

Global market panic sparks more gold buying, bullion near record

Global market panic sparks more gold buying, bullion near record

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LONDON (Thomson Financial) - Global panic on the markets triggered fresh waves of investment into gold, keeping the metal near a record 1,032.50 usd per ounce hit in Asian trading hours.

Unrelenting dollar weakness, with the greenback near another record low against the euro and a 12-year bottom against the yen, also sparked gold-buying, as bullion became cheaper for those trading in other currencies.

Investors rushed to buy gold, often seen as a good store of value, as the credit crisis deepened on the news JPMorgan Chase (nyse: JPM - news - people ) would buy stricken rival Bear Stearns (nyse: BSC - news - people ) for a shockingly low 2 usd per share or 236 mln usd.

The US Federal Reserve also approved yesterday a cut in its emergency lending rate to financial institutions to 3.25 pct from 3.50 pct, effective immediately, and created a lending facility for big investment banks to secure short-term loans.

The Fed action came just two days before the central bank's scheduled meeting tomorrow, where another big cut to a key interest rate that affects millions of people and businesses is expected to be ordered. That key rate is now at 3 pct and is expected to be cut by at least one-half percentage point tomorrow. A bigger cut, which is also expected by some, would likely weaken the dollar and boost gold.

'Given the likelihood of further rate cuts at this weeks FOMC meeting, we remain bullish towards gold and anticipate the metal could test as high as 1,150 usd this quarter as investors seek to offset rising safe-haven and inflationary concerns,' said TheBullionDesk.Com analyst James Moore.

Elsewhere, rocketing oil prices, which hit a record high this morning, boosted gold's appeal as a hedge against inflation.

At 9.23 am, spot gold was trading at 1,025.65 usd per ounce against 998.60 usd in late New York trade on Friday.

Silver also set a new 27 year high, following in gold's footsteps, of 21.34 usd per ounce this morning. By 9.23 am, silver was at 21.21 usd against 20.58 usd per ounce.

Platinum was at 2,054 usd per ounce from 2,068 usd in late New York trades on Friday while palladium was down at 497 usd from 504 usd per ounce.

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