Gold Heads for Seventh Year of Gains, Holds Near 28-Year High

By Glenys Sim and Alaric Nightingale
Bloomberg
Jan. 02, 2008

Dec. 31 (Bloomberg) -- Gold held near a 28-year high in London, heading for a seventh straight annual gain, boosted by the dollar's decline and civil unrest in Pakistan after the assassination of Benazir Bhutto.

Gold for immediate delivery slipped $1.82, or 0.2 percent, to $838.54 an ounce as of 9:41 a.m. in London, 1.3 percent below the $850 reached in 1980. Pakistan's Election Commission said today it may delay Jan. 8 general elections because of rioting that followed the assassination last week of Bhutto, the main opposition leader.

``Investors continue to be attracted by the metal's safe haven qualities,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in an e-mailed note today. A ``recent spike'' in civil unrest and weakening dollar are stoking gains in the precious metal, he said.

The dollar headed for its second consecutive annual decline against the euro and will snap two years of gains versus the yen after traders raised bets the Federal Reserve will risk fanning inflation by cutting rates again.

The dollar declined against 14 of the 16 most active currencies this year as the Fed lowered borrowing costs three times because of a slumping housing market.

The dollar traded at $1.4706 per euro in London, down 12 percent for the year. It was down 6 percent for the year against the yen.

`Phenomenal' Increase

Gold has gained 32 percent this year, its best performance since 1979, as surging fuel expenses boosted demand for the metal as a hedge against inflation. The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities has climbed 22 percent this year.

Gold's advance has been ``phenomenal,'' Moore said in a phone interview today. ``It's been an awesome year.''

Gold futures for February delivery rose as much as $4.70, or 0.6 percent, to $847.40 an ounce on the Comex division of the New York Mercantile Exchange. The contract stood at $841.20 an ounce at 9:41 a.m. London time.

The spot price climbed to $850 on Jan. 21, 1980.

``It's not a matter of if it will go to $850, but when,'' Moore said.