Gold surged in late trading to a 28-year peak of $824 an ounceOil, gold and euro surge to record prices
By Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard
Last Updated: 1:09AM GMT 08 Nov 2007
Oil has rocketed to an all-time high of $97 a barrel in New York on fears of terrorist attacks on pipelines in the Middle East and falling crude inventories in the United States.
Comment: Stampede into gold comes with a wealth warning
Credit crunch crisis in full in our special section
In a day of wild movements across global markets, the dollar continued to plunge to all-time lows against European currencies while gold surged in late trading to a 28-year peak of $824 an ounce.
The euro reached $1.4568 and sterling broke through $2.09 for the first time since the early Thatcher era in 1981 as funds increased bets that the US Federal Reserve would soon have to cut interest rates again to head off a property crash. By contrast, the European Central Bank may have to raise rates above 4pc after euro-zone inflation reached 2.6pc in October.
Former Federal Reserve chief Alan Greenspan told a forum in Tokyo that the euro's rise against the dollar is "already finished", predicting that the next phase would be a catch-up by the East Asian currencies, such as the yen and the yuan.
Oil was lifted by a warning from the US Energy Information Administration that "strong demand, limited surplus capacity, falling inventories and geopolitical concerns continue to weigh on the market".
It said US oil reserves fell 4pc last year on lack of new discoveries, with steep drops in the Gulf of Mexico and Alaska.
In London, Brent crude rose $2.59 to a record $93.08 a barrel.
The latest slide in the dollar came after the Fed's loan officer survey reported evidence of an incipient credit crunch across broad reaches of the US economy, with banks tightening lending standards on prime mortgages, auto debt and consumer loans.
Bill Gross, head of the giant bond fund PIMCO, said the Fed would have to cut rates to 3.5pc to cushion the blow from likely losses of $250bn on sub-prime and Alt-A debt.
"We've only begun to see the pain for the homeowner in terms of those monthly payments. Defaults and delinquencies will increase as we extend throughout 2007 and into 2008," he said.
Massive purchases of gold by small investors buying exchange traded funds (ETFs) helped drive gold to fresh highs, while traders said that a large buyer operating in Germany had emerged - raising speculation that an Asian or Middle Eastern central bank or sovereign wealth fund has been accumulating bullion.
Barclays Capital said the world gold market had swung this year from surplus to a deficit of 234 tonnes. "The market has not seen such a wide deficit since 1979, according to our market-supply demand model," it said.
UBS upgraded its one-month gold forecast to $850 but warned that speculative positions on New York's Comex futures market had reached extreme levels, which is typically a warning sign.
"A scramble could see gold push higher still. But one thing is sure, once the dust settles, gold will likely correct sharply lower," said the bank's precious metals analyst, John Reade.
Gold has surged $180 an ounce since mid-August. The last time it moved in this fashion, in May 2006, it gave up almost all the gains in a matter of weeks. The concern is that buyers for the jewellery industry will hold back until the price falls, while European central banks are likely to take advantage of the spike to offload bullion.
Even so, gold is likely to stay firm as long as oil keeps reaching new heights. The two are linked automatically through huge commodity funds that have emerged as major players in the market.
Oil has rocketed to an all-time high of $97 a barrel in New York on fears of terrorist attacks on pipelines in the Middle East and falling crude inventories in the United States.
Comment: Stampede into gold comes with a wealth warning
Credit crunch crisis in full in our special section
In a day of wild movements across global markets, the dollar continued to plunge to all-time lows against European currencies while gold surged in late trading to a 28-year peak of $824 an ounce.
The euro reached $1.4568 and sterling broke through $2.09 for the first time since the early Thatcher era in 1981 as funds increased bets that the US Federal Reserve would soon have to cut interest rates again to head off a property crash. By contrast, the European Central Bank may have to raise rates above 4pc after euro-zone inflation reached 2.6pc in October.
Former Federal Reserve chief Alan Greenspan told a forum in Tokyo that the euro's rise against the dollar is "already finished", predicting that the next phase would be a catch-up by the East Asian currencies, such as the yen and the yuan.
Oil was lifted by a warning from the US Energy Information Administration that "strong demand, limited surplus capacity, falling inventories and geopolitical concerns continue to weigh on the market".
It said US oil reserves fell 4pc last year on lack of new discoveries, with steep drops in the Gulf of Mexico and Alaska.
In London, Brent crude rose $2.59 to a record $93.08 a barrel.
The latest slide in the dollar came after the Fed's loan officer survey reported evidence of an incipient credit crunch across broad reaches of the US economy, with banks tightening lending standards on prime mortgages, auto debt and consumer loans.
Bill Gross, head of the giant bond fund PIMCO, said the Fed would have to cut rates to 3.5pc to cushion the blow from likely losses of $250bn on sub-prime and Alt-A debt.
"We've only begun to see the pain for the homeowner in terms of those monthly payments. Defaults and delinquencies will increase as we extend throughout 2007 and into 2008," he said.
Massive purchases of gold by small investors buying exchange traded funds (ETFs) helped drive gold to fresh highs, while traders said that a large buyer operating in Germany had emerged - raising speculation that an Asian or Middle Eastern central bank or sovereign wealth fund has been accumulating bullion.
Barclays Capital said the world gold market had swung this year from surplus to a deficit of 234 tonnes. "The market has not seen such a wide deficit since 1979, according to our market-supply demand model," it said.
UBS upgraded its one-month gold forecast to $850 but warned that speculative positions on New York's Comex futures market had reached extreme levels, which is typically a warning sign.
"A scramble could see gold push higher still. But one thing is sure, once the dust settles, gold will likely correct sharply lower," said the bank's precious metals analyst, John Reade.
Gold has surged $180 an ounce since mid-August. The last time it moved in this fashion, in May 2006, it gave up almost all the gains in a matter of weeks. The concern is that buyers for the jewellery industry will hold back until the price falls, while European central banks are likely to take advantage of the spike to offload bullion.
Even so, gold is likely to stay firm as long as oil keeps reaching new heights. The two are linked automatically through huge commodity funds that have emerged as major players in the market.
