Gold hits record above $1,105 and analysts still predicting more upside

Safe haven buying was the watchword in Asia on Monday after weaker than expected unemployment data from the US did the dollar no favours

SINGAPORE (Reuters) - 

Gold powered to another record high on Monday on safe-haven buying as the U.S. dollar slipped and after a weaker-than-expected U.S. unemployment rate revived worries about the health of the global economy.

Gold has gained more than 25% in 2009, driven by persistent weakness in the U.S. currency that has lost more than 6% versus the euro so far this year, and recently by the failure of a meeting of the Group of 20 finance officials to talk more specifically about the dollar's decline..

As expectations rise that central banks across the globe might look to buy gold to diversify their reserves, analysts say that there could be more upside for the precious metal.

"The fundamental outlook for gold remains favourable," Credit Suisse said in a research report.

Cash gold hit a high of $1,104.80 an ounce, surpassing Friday's lifetime high of $1,100.90, with a jump in oil prices and India's recent purchase of IMF gold adding to the bullish sentiment.

U.S. December gold futures jumped as high as $1,105.4 an ounce to another lifetime high.

"When you look at the RSI on a 14-day basis, it's still in a positive story because it's not overly bought. So, there's potential for further upside," said Mark Pervan, ANZ's senior commodities analyst.

"It could move up quite strongly as we haven't any key resistance level in place," he added.

The dollar index slipped 0.23% to 75.646, while the euro edged up to $1.4870, with a statement from the IMF that the dollar remained on the "strong side" despite a recent sell-off spurring another bout of selling in Asia.

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U.S. employers cut 190,000 jobs in October, greater than the 175,000 fewer jobs forecast, and the unemployment rate rose to 10.2%, a 26-1/2-year high that was above average forecasts of a 9.9 percent rate. and

"We are in uncharted territory," said Darren Heathcote, head of trading at Investec Australia in Sydney.

"The trend is still intact. We're still looking at a positive gold market. (There) doesn't seem to be any particular reason to be selling. I think we are going to be looking for more economic data to decide where we go from here."

In addition to weakness in the dollar, news that the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India for $6.7 billion was also a trigger in bullion's rise.

Japan's foreign reserves rose to a record high for the third straight month in October partly as rising gold prices inflated the value of its gold holdings, the Ministry of Finance said on Monday.

"I don't think there's physical buying but sentiment is still bullish because of a strong euro against the dollar and also firm crude oil prices," said a dealer in Hong Kong, adding that the market saw buying interest from speculators in the United States, Japan and other parts of Asia.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,108.344 tonnes as of November 6, unchanged from the previous business day. Noncommercial net long U.S. gold futures positions fell 0.2 percent to 241,319 lots in the week to November 3 from 241,777, a weekly report by the U.S. Commodity Futures Trading Commission showed.

Oil prices rose $1 to $78.43 a barrel on Monday, as Hurricane Ida roared through the Gulf of Mexico, where important oil fields are located, and on the back of the falling dollar.

© Thomson Reuters 2009 All rights reserved

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