GOLD RISES AS DOLLAR WEAKNESS CONTINUES TO SPUR BUYING
LONDON, Mar. 26, 2008 (Thomson Financial delivered by Newstex) — Gold rose while the dollar remained weak, oil prices ticked up and fund money returned to the commodity sector.
Bullion fell over 10 pct last week from record highs above 1,000 usd as players took profits but gold’s main drivers — a weak dollar, persistent economic weakness and high oil prices — remain supportive for the metal.
‘The weakening dollar and the rise in oil prices as well as firmer prices across the agricultural sector supported gold’s recovery yesterday and ongoing inflationary concerns coupled with safe-haven buying are likely to underpin gold prices over the forthcoming months,’ said Barclays (NYSE:BCS) Capital analysts.
Gold moves in the opposite direction to the dollar, as it is seen as an alternative asset, and in line with oil prices, as bullion is bought as a hedge against energy-led inflation.
The dollar dropped against the euro after the German Ifo business climate index in March boosted the euro, adding to the evidence the economy is bearing up surprisingly well against an adverse global environment.
At 1.54 pm, spot gold was trading at 945.53 usd per ounce, against 934.70 usd in late New York trade yesterday.
Analysts also noted physical gold buying has picked up since the price eased from record levels.
‘Near-term upside potential has returned to the gold market,’ said Standard Bank analyst Walter De Wet.
Gold had risen some 25 pct since the start of 2008, hitting a record 1,032.50 usd per ounce on March 17 before retreating amid slightly calmer market conditions and as players took profits.
But economic woes are far from over and any major falls in equity markets are likely to spark fresh risk aversion, which should see the price of gold, a traditional safe haven, rise again.
‘For now, we shall sit tight, convinced that the long-term bullish trend for gold remains fully intact and is all the healthier because of the liquidation last week, but concerned about the future prospect for equity prices,’ said Dennis Gartman, editor of daily trading note The Gartman Letter.
Elsewhere, platinum was trading up strongly at 1,978 usd per ounce against 1,879 usd, silver was up at 17.97 usd per ounce against 17.75 usd and palladium was down at 449 usd against 451 usd.
Looking ahead, players will keep an eye on potentially dollar-moving data that could nudge precious metals. US data today includes February revised building permits, February durable goods orders and February new home sales.
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