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METALS STOCKS

Gold trades at 28-year high on safe-haven buying
By Polya Lesova, MarketWatch
Last Update: 4:40 PM ET Nov 5, 2007

NEW YORK (MarketWatch) -- Gold futures traded at their highest level in nearly 28 years on Monday, as renewed turmoil in the credit markets boosted the metal's safe-haven appeal after Citigroup said it will have to write off up to $11 billion more in losses.

"Several items of concern are still fueling the flight to gold," said Jon Nadler, an analyst at Kitco Bullion Dealers, in a research note. "One of them [is] the $11 billion in Citigroup write-offs that have resulted in Mr. Prince losing his crown at the mega-bank. First Merrill, now Citi. The [fallen] head count is mounting."

Gold for December delivery rose $2.30 to end at $810.80 an ounce on the New York Mercantile Exchange. Earlier in the session, gold hit an intraday high of $813.80 an ounce, a level not seen since 1980.

The record high for Nymex gold was $875 set on Jan. 21, 1980, and the record settle was $825.50 set on the same date.

"I still think gold is moving nowhere but up," said Zachary Oxman, a senior trader at Wisdom Financial. "Today's rally seems to be further long-side accumulation off of a continued weakening dollar."

"I think that long term the market is predicting further drops by the dollar and is looking to play the big moves through long side gold," Oxman said in emailed comments.

On the currency markets, the dollar index, which tracks the greenback against a basket of six major currencies, edged up 0.1% at 76.42. See Currencies.

On Friday, gold futures rallied $14.80 to finish at $808.50 an ounce on Nymex.
"The ailing dollar, near record oil prices and the developing and deepening housing and credit crisis are all supporting the surging gold price," said Mark O'Byrne, director at Gold and Silver Investments Ltd., in a research note.

Financial turbulence was back in the news Monday as Citigroup said it will write off another $8 billion to $11 billion to reflect the declining value of subprime mortgage-related securities since Sept. 30, leading CEO Charles Prince to step down.

Crude-oil futures fell sharply, down nearly $2 a barrel from Friday's highest close on speculation the economy of the U.S., the world's largest oil consumer, may be dragged down by the credit crisis.

"In the past, the gold market influenced far less directly by external macro-economic factors, would not have made it through the $800 level," said Julian Phillips, an analyst at GoldForecaster.com. "However, in this new global monetary and macro-economically influenced gold market, gold appears to be holding over the $800 level."

"If it can hold up above that line, then the path very much higher will be far quicker than the last $100 climb," he said in emailed comments. "The investment qualities of gold as a 'contra' investment are shining brightly, taking it higher and higher."

Also on Nymex, December silver rose 18.60 cents at $14.785 an ounce, January platinum gained $3.80 at $1,466.50 an ounce, while December palladium fell $2.30 at $375.10 an ounce.

Copper for December delivery fell 2.30 cents at $3.3020 a pound.

Metals stocks decline

Indexes tracking mining and metals shares fell on Monday. The Philadelphia Gold and Silver Index (XAU: 192.06,) dropped 0.5% at 186.61 points. The CBOE Gold Index (GOX: 189.27,) slipped 0.7% at 189.27 points and the Amex Gold Bugs Index (HUI: 436.81, ) fell 0.6% at 436.75 points.

As for sector exchange-traded funds, the StreetTracks Gold Trust ETF (GLD: 81.00, ) edged down 0.1% at $79.75, the iShares Silver Trust ETF (SLV: 146.18, ) rose 0.6% at $146.18, while the Market Vectors-Gold Miners ETF (GDX: 50.44, ) slipped 0.5% at $50.44.

Gold warehouse inventories rose by 1,543 troy ounces to stand at 7.3 million troy ounces as of late Friday, according to Nymex data. Silver inventories dropped by 362,541 troy ounces to stand at 133.3 million troy ounces, while copper supplies fell by 130 short tons to stand at 19,095 short tons.

Polya Lesova is a MarketWatch reporter based in New York


Metals Stocks - Gold trades at 28-year high on safe-haven buying

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