Gold Near 16-Year High in London on Dollar, India

November 11, 2004

Gold Near 16-Year High in London on Dollar, India

Gold prices rose close to a 16-year high in London this week, boosted by a decline in the dollar and consumers buying jewelry for the annual festival of Diwali in India, the world's largest gold consumer. Diwali, the Hindu festival of lights, starts Nov. 12. Gold for immediate delivery reached $435.25, the highest price since July 1988, according to Bloomberg News.

The euro has risen for four straight weeks against the dollar, plus Indian consumers bought 479 tons of gold in jewelry form last year, equal to about one in every five days of mine supply, according to London-based researcher GFMS Ltd. Diwali, the Hindu festival of lights, which starts Nov. 12.

"Consolidation could see gold fall back to the $418-20 area where physical buying, particularly from India, should be found," says James Moore, an analyst at in the U.K.

In the U.S. this week, gold for December delivery rose 90 cents, or 0.2 percent, to $434.30 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

The euro yesterday fell for the first day in four against the dollar after European Central Bank President Jean-Claude Trichet said the currency's rally wasn't welcome.

Gold prices will likely rise in the next year as supply is crimped by falling production and reduced sales by central banks, says Evy Hambro, who helps manage $6 billion for Merrill Lynch & Co. in London. Lower exploration spending and mine closings in South Africa may curb the amount of gold brought to market, Hambro said at a presentation in Sydney.

Among other precious metals for immediate delivery in London, silver fell 1 cent to $7.45 an ounce. Platinum rose $5, or 0.6 percent, to $852 and palladium added $4, or 1.9 percent, to $217.

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