Gold hit record highs at $993.20 within sight of the next target of $1,000 an ounce, as the dollar struck an all – time low against the euro $1.5429 the highest level since its launch in 1999 and oil stood near $106 a barrel. Silver struck a 27 – year high on speculative buying. Gold has gained as much as 19% in 2008 as funds, speculators and investors pour money into precious metals on expectation of further interest rate cuts in the United States and record – high oil, which lift its safe – haven appeal.
Crude oil held steady on Friday at $105.50 a barrel, after hitting a record near $106 a barrel on Thursday, aided by OPEC’s decision to keep output levels unchanged and US government data showing a surprise drop in crude inventories. Distillate inventories, including heating oil, fell 4.8 million barrels, dropping for the fourth consecutive week as colder weather boosted heating demand in the US Northeast. Tensions in Venezuela, an OPEC producer and the third largest oil supplier to the United States, provided further support to the market. Venezuela deployed tank and air and sea forces towards the Colombian border on Wednesday in its first major military mobilisation in a crisis that has raised fears for regional stability.
The dollar fell to a record low against a basket of major currencies as weak US service sector and employment data kept alive fears of a US recession. The dolar is expected to fall to levels such as $1.60 to the euro in coming days and weeks. Investors see a chance the Fed could slash rates by a full percentage point in March, which would further undermine the dollar, following an unusually aggressive 1.25 percentage points of cuts in January to 3 percent. The Fed’s response to the US economy’s downturn and the housing market crisis stands in sharp contrast to the European Central Bank, which kept rates on hold at 4 percent on Thursday. The ECB played down the prospects of a rate cut and did not express concerns about the euro’s strength. Fed Chairman Ben Bernanke has highlighted the economy’s downside risks and mentioned the possibility of smaller banks failing.
