Capital Gold Group Report: Gold Jumps Above $925 on Bargain Hunting and Dollar Weakness
FXStreet.com
Fri, May 23 2008, 12:56 GM
LONDON (Thomson Financial) - Gold jumped above $925 after closing well below a one month peak on Thursday on bargain hunting, expectations for dollar weakness and as inflation concerns remained ahead of a long weekend.
The U.S. and UK markets will be closed on Monday, leading to some increased purchases.
Rocketing oil prices, which remain close to record highs, coupled with expectations for dollar weakness are supporting the precious metal. Meanwhile, the threat of more economic weakness remains, which boosts gold's safe haven appeal.
"The macroeconomic environment remains broadly supportive of gold prices," said HSBC analyst James Steele. "Factors supporting gold include the credit crunch, heightened financial market instability, and an increase in inflationary pressures associated with rising oil and food prices. These factors, including prolonged dollar weakness, in our view, encourage investor demand for safe-haven assets, notably gold."
While the dollar has picked up against the euro slightly over the past day, analysts say the greenback's rise will be limited, particularly ahead of the release of U.S. home sales data later on Friday.
"A major test arrives today ... in the form of the U.S. existing home sales data for April," said Steve Pearson, analyst at HBOS.
"The downtrends in both mortgage applications for home purchase and pending home sales point to further weakness. This could well provide something of a reality check to markets, with the U.S. dollar and equities turning tail simultaneously," he said.
Such weakness could spark another round of gold buying.
At 1:31 p.m., spot gold was trading at $925.80 per ounce against $918.60 in late New York trade on Thursday. Gold hit $935.18 Thursday, its highest value in a month.
In other precious metals, platinum was higher at $2,180 per ounce from $2,171.
Meanwhile, sister metal palladium edged down to $447 per ounce from $451.
Silver rose to $18.21 per ounce from $17.94.
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