Money and Metals

Bloomberg reports on what is driving gold higher. "Gold rose to a two-week high on speculation that central banks, the biggest holders of the precious metal, may buy more bullion to bolster their reserve assets. China should increase its gold holdings to 2,500 tons from 600 tons, said China Galaxy Securities economist Teng Tai. Russia, South Africa, and Argentina also have said this year they would hold more gold. Central banks, mainly in the U.S. and Europe, hold almost a fifth of the world's gold."

"Gold futures for February delivery rose $6.20, or 1.2 percent, to $516.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $520.20, the highest since Dec. 14. Gold has jumped 18 percent this year, heading for a fifth straight annual gain."

"Increasing its holdings to 2,500 tons would make China the world's fifth-biggest holder of gold, behind the U.S., Germany, the International Monetary Fund and France. It is currently the 10th largest holder, according to the producer-funded World Gold Council."

"Gold has rallied from a 20-year low of $253.20 an ounce in 1999 partly because 15 central banks in Europe agreed to limit annual bullion sales. Central banks sold 478 metric tons last year, or 23 percent less than in 2003."

"Gold also gained on speculation a cooling housing market may slow the U.S. economy and send the dollar lower. 'The housing market will have an impact if it comes off hard,' said Domenick Nardo, a trader in New York. 'A weak forecast for the economy would be supportive of gold.'"