High Oil Prices Provoke Gold Leaps

Monday disclosed a gold growth whilst oil soared to a record high near $120 a barrel, but investors were cautious ahead of this week’s meeting of the US Federal Reserve on interest rates.

Bullion rose as high as $894.25 an ounce and was quoted at $892.40/893.10 against $886.90/ 888.30 in New York late on Friday.

Gold got support from strong oil and a weaker dollar, but analysts said bullion’s upward movement was not as impressive as it was last month when historic high oil and a record low dollar propelled gold to a lifetime high of $1,030.80 on March 17.

The metal has fallen 13 percent since then and has been struggling to regain $900. It hit a three-week low of $877.60 on Friday before rising after oil surged, lifting gold’s appeal as a hedge against inflation.

A rate cut tends to weaken the dollar and lift gold demand, as the metal is seen as an alternative investment and often moves in the opposite direction of the US currency.

“Sluggish mine supply, weak equity/property markets and a low US dollar should see gold trade in a $800-$1,050 range over the next six months, before it weakens significantly in 2009,” said David Thurtell, metals analyst at BNP Paribas.

Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $5.30 an ounce to $895.00 an ounce in electronic trading.

In industry news, Russia’s Highland Gold Mining Ltd said it recorded a profit of $18.1 million in 2007, reversing a $94.9 million loss in 2006. It produced 156,474 ounces of gold in 2007 and sold 150,427 ounces at an average price of $708 per ounce.

In other metals, platinum rose to $1,965/1,980 an ounce from $1,944/1,964 late on Friday, silver gained to $16.95/17.00 an ounce from $16.83/16.89 and spot palladium was up $1.50 at $437/445 an ounce.