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John Dizard in the Financial Times: Gold knows that all those debts are no good

Section: Daily Dispatches

By Kevin Morrison
Financial Times, London
Wednesday, December 7, 2005

news.ft.com/cms/s/b50079a8-6712-11da-a650-0000779e2340.html

Gold rose to a 24-year high on Wednesday, touching $516.50 a troy
ounce on Japanese private investor buying as well as benefiting from
the flow of investment funds into commodities markets, which has
pushed many metal prices to record peaks.

Paul Merrick, vice president commodities at RBC Capital, said the
strength in the gold market has raised the possibility of central
bank buying.

"There is concerted buying by a significant buyer, and it could be a
central bank," said Mr Merrick. Central banks have been net sellers
of gold for the last 40 years, although there have been occasional
purchases. However, recent positive comments on gold by officials
from Argentinian, Russian and South African central banks have given
bullion traders hope that some banks may start buying again.

Mr Merrick said the 10 per cent rise in the gold price in the past
three weeks has not been accompanied by a significant lift in buying
of Comex gold futures in New York. Turnover in gold futures on the
Tocom exchange in Tokyo was 7.5m ounces, exceeding Comex in New York
by nearly 3m ounces. Normally, Tocom volumes are only one third of
those traded on Comex.

"This suggests that there could be another large buyer out there, as
there is a concerted effort to buy on any dips in the prices," Mr
Merrick said.

Gold also reached a record high of 440.53 a troy ounce in single
currency terms, and neared 300 sterling for the first time in
almost 20 years.

Silver reached another 18-year high when it hit $8.86 a troy ounce.

Base metals also had a record breaking day. The three-month copper
price hit a record high of $4,452 a tonne on the London Metal
Exchange after Chilean rail workers that serve the country's top
copper mines went on strike on Wednesday, prompting concerns that
output of the metal could be affected.

China's State Reserve Bureau, which is at the centre of market
speculation that it might have to buy copper to cover its
obligations, only managed to sell 3,700 tonnes of copper from a
planned 20,000 tonne auction.

The three-month LME aluminium price hit a 16-year high of $2,248 a
tonne and zinc also reached a 16-year high of $1,832 a tonne.

Oil prices extended their losses after a bigger than expected
increase in US crude inventories. IPE Brent for January delivery
declined 63 cents to $56.98 a barrel at the close of London trade.
January Nymex West Texas Intermediate slipped 73 cents to settle at
$59.21 a barrel in New York trade.

Refined sugar futures touched a nine-year high of $333.5 a tonne in
London, while raw sugar prices in New York reached a 10-year high of
$13.50 a pound.

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