TheWalk.com

By Myra P. Saefong, MarketWatch

HONG KONG (MarketWatch) — Gold futures climbed more than $6 an ounce in electronic trading Monday, sending the December contract to the highest level a front-month futures contract has seen since 1980.
Analysts attributed the gains to everything from investors diversifying assets to safe-haven buying against a backdrop of tension between Turkey and Iraq.
Gold for December delivery touched $760.80 at its peak in electronic trading as of 4 a.m. U.S. Eastern. That was the highest intraday price a front-month contract has seen in almost 28 years.
“The break of the psychological $750 level paved the way for a rally toward $780 per ounce and subsequently, possibly, $800.’— Frederic Panizzutti, MKS
The all-time high for a benchmark gold contract on Nymex stands at $875, set on Jan. 21, 1980.
December gold was last at $759.60, up $5.80 in electronic trading.
“We are now seeing channels of buying interest,” said Frederic Panizzutti, senior vice president at Swiss-based MKS, one of the world’s largest precious metals traders and refiners.
There are buyers who are trying to diversify some of their assets, mainly by decreasing their U.S. dollar exposures by investing in gold, and there’s ongoing worry about the impact of the recent subprime crisis, he said in e-mailed remarks.
Barrier break
Fueling the rise, also, was the break of the psychological $750 level, which “paved the way for a rally toward $780 per ounce and subsequently, possibly, $800,” he said.
“The overnight buying in the Asian room confirms the sharp appetite for gold,” he said.
But he warns, “gold shall trade in a very volatile and erratic way from here. We are soon running into unexplored territories, which should attract broader interest, curiosity and certainly volatility into the market.”
Given all that, Panizzutti said, it “remains likely that we see some profit-taking at some stage, resulting in a short-lived correction.”
But for now, “sellers remain too shy, and the large and well distributed buying community is still dictating the way,” he said.
Safe-haven buy
Meanwhile, tension in the Middle East added support to gold.
Over the weekend, the Associated Press reported that a Kurdish rebel commander warned Turkey it would encounter tough resistance and a Vietnam-style conflict if it launched a large-scale offensive against Kurdish rebels in northern Iraq.
“Growing difficulties with Turkey should be watched,” with the Kurdish rebels in northern Iraq and eastern Turkey clashing with Turkish troops, said Ned Schmidt, editor of the Value View Gold Report.
Meanwhile, a resolution in the U.S. Congress condemning Armenian genocide by Turkey in the early 1900s is further aggravating the situation, Schmidt said in his latest report, released Saturday.
“This situation has potential to destabilize the region,” Schmidt said. And “fear of instability is part of the reason oil and gold moved higher on Friday.”