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Gold at four-month high
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February 7, 2000: 7:22 a.m. ET
Mining groups and hedge funds push price to $316.60 an ounce
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LONDON (CNNfn) - Gold prices surged to a four-month high Monday on a combination of buying by hedge funds and gold producers that analysts said would stabilize the market.
The gold price was fixed at $316.60 per troy ounce in London, a $23 rise from its Friday close, following sharp climbs in Asia overnight where the spot price peaked at $318.
Rhona O'Connell, analyst at T. Hoare in London, said the market's momentum was boosted last week by a move into gold by hedge funds that had made heavy losses on their bond portfolios amid the volatility in fixed-income markets in recent weeks.
However, the decision Friday by Canadian producer Placer Dome to suspend its hedging program in anticipation of firmer prices "tipped the market over the edge," noted O'Connell, with other mining groups expected to follow suit as the market stabilizes.
South Africa's AngloGold, the world's largest producer, announced plans Monday to cut its own hedge book. Mining groups had built up huge hedge facilities last year to protect themselves against the weak market conditions.
Gold prices plummeted in the first half of last year after a number of central banks, notably Britain's, cut back on their gold-based reserve holdings. The market recovered after 15 European central banks affirmed their commitment to holding gold and pledged to limit sales, but lagged again the final quarter of the year.
O'Connell said the market could look forward to stability within a $300 to $325 trading range. "At any price below $300, the imbalance between physical gold demand and supply is enormous," she added. 
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