(adds closing prices)
LONDON, Sept 25 (Reuters) - Gold ran to its highest level in more than seven years on Thursday as fund buyers piled into the metal, inspired by a surprise decision from OPEC (News - Websites)on Wednesday to cut oil output and a weaker dollar, which raised bullion's safe-haven appeal.
"The bulls have got the bit between their teeth and any news is good news -- it doesn't matter what it might be, it's good news," Societe Generale economist Stephen Briggs told Reuters. By 1515GMT, spot gold (XAU=) closed at $390.40/391.10 per troy ounce after spiking to a high of $393.30 -- not seen since mid May 1996. That compared with $387.00/387.80 at the New York close on Wednesday.
Analysts signalled even more gains, after a period of consolidation, with prices over the psychologically significant $400 barrier looking increasingly likely. "The technical chart looks very strong still -- so from that point of view we could see further speculative buying into gold. The next target is $401.00," said Ingrid Sternby of Barclays Capital.
Share prices dropped on concerns that higher oil prices could jeopardise an economic rebound in the United States, leading to a wave of gold short covering in Asian and European trading. Further fuel was added to gold with the release of disappointing U.S. economic data. A surprise 0.9 percent drop in U.S. durable goods orders in August pressured industrial metal prices, traders said. Wall Street had expected orders to rise 0.6 percent. MAGIC $400?
In other precious metals, silver was again fired up by gold, with the spot reference price fixed at a fresh 3-1/2 year peak at 531.75 cents an ounce. The spot price was last quoted at $5.22/5.24, after touching a high of $5.35 earlier and compared with $5.26/5.28 late in New York on Wednesday. Platinum moved up to $711.00/716.00 from $705.25/709.75, while palladium edged up to $216.00/220.00 from $215.00/220.00 previously.
Bullion has risen some 14 percent since July as the dollar has weakened making gold more affordable for buyers using other currencies, while doubts over a recovery in the U.S. economy has lit up the precious metal on the radar screens of less traditional investors. Traders said the oil supply news was supportive for gold in its use as a hedge against inflation. Rising oil prices are generally seen as an early indicator of the inflation scourge, which lessens the value of traditional assets such a stocks and bonds.
The Organisation of Petroleum Exporting Countries (OPEC) decided on Wednesday to remove 900,000 barrels a day from supply limits from November.
Briggs said however that the oil news was just an excuse for the market to go higher in its current bullish mode, with fundamental issues like weak physical and fabrication demand remaining in the background."How long this run will last, nobody can say. We're going to see a dramatic slide in physical demand for gold but in the short term it simply doesn't matter," he said.