Gold rose to within striking distance of its record high on the last trading day of 2007, helped by safe haven buying prompted by concerns about the deteriorating political situation in Pakistan following the assassination of Benazir Bhutto on Thursday.
Gold reached a session high of $843.20 a troy ounce on Monday, the highest level since January 1980, when bullion reached a record $850 during a period of intense geo-political tensions including the US hostage crisis in Iran and the Soviet Union’s invasion of Afghanistan.
Dealers said thin trading conditions were contributing to price volatility for precious metals and that there was a reluctance to go short (bet on price weakness) ahead of the New Year break as the situation in Pakistan was so unstable.
Officials in Pakistan will decide later on Tuesday whether to go ahead with the election for president later this month as outbreaks of sporadic violence continued across the country.
Jude Brhanavan of Deutsche Bank pointed out that 2007 marked the sixth consecutive year of positive returns for gold so this represented the longest price rally for gold in history.
Geo-political concerns also provided support for oil prices. On Sunday, Iran’s foreign minister said the country’s first atomic power plant would start operations by the middle of 2008, renewing concerns about Teheran’s nuclear ambitions.
Nymex February West Texas Intermediate gained 33 cents at $96.33 a barrel while ICE February Brent rose 59 cents to $94.47 a barrel.
The latest data on speculative positioning from the Commodity Futures Trading Commission showed that in the approach to Christmas, speculators increased net long positions (bets on further price gains) across the entire commodities complex with the exceptions of natural gas and palladium.
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