A frenetic day in the metals markets saw gold prices soar Thursday as a credit-rating upgrade for China weakened the dollar and an Al Qaeda call-to-arms spurred interest in so-called safe-haven investments. "The currency news about China is putting pressure on the U.S. dollar," says Randy Diamond at New York-based Miller Tabak, adding the threat of more terrorism only helped gold's case. "People are very sensitive and are definitely not blowing it off." The spot price for gold was trading around $634 per ounce in London, up $16.45 compared to the previous day. In New York futures trading, prices for December delivery soared to $653.80 before easing to close at $646, up $11.30 on the Comex Division of the New York Mercantile Exchange. Standard & Poor's upgraded China to A from A- as a result of "excellent growth prospects" and "improving fiscal flexibility," according to a release Thursday morning by the rating agency. The news comes as investors are increasingly confident the Federal Reserve will not hike interest rates at its Aug. 8 policy meeting in the light of more evidence of a U.S. economic slowdown. The combination weighed on the U.S. dollar, which was recently trading at 115.88 yen vs. 116.33 late Wednesday. Even gold bears say the recent run-up in bullion prices could have legs enough to send it further, perhaps even to record levels. "I think the factors that cause investors to want to buy gold" -- worries about inflation, a weak dollar and continued strife in the Mideast -- "will continue to deteriorate and we will see gold prices rise sharply," says Jeff Christian, managing director of specialty commodity consulting company CPM Group in a
StreetWatch interview . Christian sees gold smashing through $700 before April 2007, and says it could hit $1,000 as seasonal buying adds to what he thinks will be solid investor demand. Thereafter, however, he's quite bearish and sees a decline caused by increased supply from new mining operations.
However, forecasting gold prices is notoriously difficult. Christian himself actually concedes that the market blew straight through his forecast of $479 average for 2006, which he submitted to the London Bullion Market Association in late 2005. Shares of the bullion exchange-traded funds iShares Comex Gold Trust ( IAU) and streetTRACKS Gold Shares ( GLD) were recently trading higher vs. the previous close but still off from the opening. The bullish news wasn't, however, enough to save the gold miners that were suffering after Newmont Mining ( NEM) reported disappointing second-quarter earnings of 36 cents a share vs. expectations of 47 cents. Shares were recently trading down 4.7%. Barrick Gold ( ABX), AngloGold Ashanti ( AU) and Freeport-McMoRan Copper & Gold ( FCX) were being pulled down by investor disappointment in Newmont. News that Freeport would not receive a credit-rating upgrade despite action by S&P to improve Indonesia's currency rating to B+ from BB- only added to the stocks' woes. Freeport's mine is located in Indonesia. Shares were recently trading down 2%. Meanwhile, Canadian nickel miner Falconbridge ( FAL) issued an appeal for shareholders to accept Inco's ( N) bid to merge, which expires today. September copper prices edged up 2.9 cents to $3.4750 a pound "as nervousness about tomorrow's Escondida vote sets in," states a daily report from commodity broker Man Financial. A worker strike at Chile's huge copper mine would increase concerns about supply of the red metal. Shares of U.S. copper miner Phelps Dodge ( PD) were edging higher.