Gold prices rise again, reach 25-year high

NEW YORK — Gold prices rose Monday, hitting a 25-year high as investor interest in the yellow metal boomed.

Spot gold settled $1.40 higher at $528.40, after easing back from a fresh high of $538.50. February gold, the most active contract, settled up $1.30 at $531.50 an ounce at the New York Mercantile Exchange, off its high of $544.50 reached earlier.

Gold, trading at levels not seen since 1981, has gained for eight straight business days. Gold and silver futures have been surging on momentum-based speculative and fund buying, as well as concerns about inflation.

Bill O’Neill of LOGIC Advisors said the longer-term picture for gold remains positive and the yellow metal is likely to reach $600 an ounce in 2006.

Physical demand for gold is holding steady despite the rise in prices, O’Neill added.

“We are seeing solid levels of demand in Russia, the Middle East and Vietnam,” said O’Neill, adding the jewelry season is being extended.

A mixture of Central Bank buying and fund interest is keeping gold buoyant, but O’Neill said the market in a “state of frenzy.”

Despite seeing healthy corrections, O’Neill said some market players may want to take option positions to be safe.

In the next few weeks, O’Neill cautioned that the market may see some end-of-the-year book squaring, but that gold is adopting a new role as an alternative non-nationalized currency.

The silver market followed gold’s moves Monday but settled lower. The most-active March contract closed the day down 21.3 cents at $8.882 an ounce. Earlier, March silver reached its highest level since 1987 at $9.345 an ounce.