Bullion Desk

Spot gold extends gains to new record high of $1,086.50/oz

November 3rd, 2009

By Perrine Faye

Spot gold extended gains in late afternoon European trade on Tuesday, printing a fresh record high above $1,085 per ounce as buy-stops were triggered following a delayed reaction to news of IMF gold sales to India.

Spot gold reached $1,086.50 per ounce, up $24.10 or 2.3 percent from Monday’s close, and well above the previous high of $1,071.10 hit on 14 October. On the charts, the next resistance levels stand at $1,100 and $1,120 per ounce - the pennant formation target - with support at $1,051.

"Stops were triggered through the $1,065/1,070 region that marked the previous record set last month," analyst David Thurtell of Citi said. "Some participants were gunning for $1,080 strikes," he added.

Initially firing the market higher was news that the International Monetary fund has sold 200 tonnes of gold to the Reserve Bank of India - the first such sale for some nine years - equating to around half of the 403.3 tonnes that the fund is looking to sell over the next few years.

The perception is that gold could gain traction from central bank diversification in emerging countries, which erodes demand for the dollar and favours the yellow metal.

"The avoidance of the spot market for this sale is good for gold as it didn’t add to supply," John Meyer of Fairfax said. "China has increased it reserves by 76 percent to 1,054 tonnes since 2003 and may purchase some of the 403.3 tonnes on sale by the IMF."

In addition, gold was buoyed by the potential for accelerated producer buybacks, Thurtell said.

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