Funds propel gold to 2005 high, eyes upside at $460/oz: analyst

London (Platts)--16Sep2005

Gold prices continued to edge higher on fund buying in early European
trade Friday, after overnight gains in New York and Asia, amid reasonable
volumes being traded.

     "Anti-inflationary hedging and technical buying have combined to push
gold to a new 17-year high this morning," said TheBullionDesk.com analyst
James Moore.

     Spot bullion was bid at $457.70/oz at 0739 GMT, up from the New York spot
close on Thursday at $454.70/oz. In the Gold Survey 2005-Update 1, published
by precious and base metal consultants GFMS, it was predicted that gold could
continue to build and reach $480/oz in the fourth quarter. 

     "Gold went up on the back of fund buying this morning, and volumes don't
look too bad at the moment," said one trader early Friday. London-based
analyst Rhona O'Connell agreed, adding it was also due to a strengthening of
other currencies. The euro was bid at $1.2281 at 0738 GMT, virtually unchanged
from its bid price at $1.2280 Thursday 1500 GMT.

     "Seasonal demand for the third quarter is usually the strongest, and
there has been a lot of fund buying in anticipation of this." The analyst
added that there was still some spot gold buying to hedge against risk as a
result of the economic impact of Hurricane Katrina on the US Gulf Coast, but
said this was of diminishing importance.

     "I think it's largely due to technical trading," the analyst said.
"Having broken last years high at $457/oz, the way is now clear for fresh
highs and with the RSI at 71.5 there is still room before gold reaches
overbought territory. Resistance is now pegged at $460-65/oz with $475-80/oz
the next major upside target," said Moore.

     Spot gold prices in Asia continued to test new 2005 highs Friday
supported by active short-covering activity, Asian market sources said. Spot
gold prices were trading in Hong Kong at $458/oz at 0700 GMT Friday, up from
$449.50/oz Thursday.

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