THE LONDON FINANCIAL TIMES
Gold touches all-time high
By Jack Farchy and Javier Blas in London
Published: March 1 2011 22:25 | Last updated: March 1 2011 22:25
Gold hit an all-time high and oil surged higher after the US said it was moving military resources to the Mediterranean, heightening fears of a full-blown war in the Middle East.
The US said it was moving marines and two warships into the Mediterranean on Tuesday night amid growing international pressure on Muammer Gaddafi, the Libyan leader, to stand aside.
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Spot bullion rose 1.5 per cent to a record $1,432.10 a troy ounce, surpassing the peak of $1,430.95 hit in December. ICE April Brent rose 3.2 per cent to $115.56 a barrel, the highest since a spike on Thursday that took the global oil pricing benchmark to within cents of $120.
“Guns and oil are a bullish mixture anywhere in the Middle East and north Africa,” said Michael Wittner, head of oil research at Société Générale in New York.
Gold prices have jumped 9.5 per cent from a low of $1,308 in January, as investors have become increasingly jittery over escalating political unrest in the Middle East.
At the same time, silver has risen 30 per cent from its January lows, on Tuesday hitting a 30-year high of $34.59 a troy ounce.
Some investors trimmed their gold positions in January, believing a rosier outlook for the US economy would boost returns on other assets.
FT In depth: Uncertainty buoys the price of gold as investors pull money out of risky assets and invest in the metal
Traders said the switch in broader market sentiment triggered by the political uncertainty in the Middle East had driven investors back to the precious metals.
“The buying has accelerated, both institutional and individual,” said James Steel, precious metals strategist at HSBC. “The geopolitical thermostat has not fallen. The situation in Libya really is almost the worst of all worlds for markets because there’s no clear winner.”
At the same time, the jump in oil prices – up $20 since January – has raised concerns of rising inflation, increasing demand for precious metals as a means of wealth preservation.
The oil market is not only concerned about the loss of production in Libya, but also the spread of unrest to other oil-rich countries in the Middle East, particularly Saudi Arabia. Protests in Bahrain, Oman, Yemen, Iraq and Jordan mean that most of Saudi Arabia’s neighbours have been affected by the turmoil in the region.
Opposition groups in the country, the world’s top oil exporter and holder of the majority of the spare production capacity, have called for a “day of rage” to be held on March 11.
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