Capital Gold Group Report: Gold and Oil Up - Dollar down - Again
NEW YORK (MarketWatch) -- Gold futures rose sharply Wednesday, boosted by rising oil prices and a decline in the U.S. dollar against other major currencies.
Gold for August delivery surged $14.30 at $885.50 an ounce on the New York Mercantile Exchange.
"The dollar lost upward momentum," analysts at Action Economics wrote
in a research report. "Investors and speculative accounts favor gold as
a result, with the yellow metal seen as a safe alternative in volatile
markets."
The yellow metal rebounded from its steep decline on Tuesday, when it finished down $26.90 at $871.20 an ounce.
On the currency markets, the dollar declined against major counterparts as traders reduced bets on interest rate cuts by the Federal Reserve and took profits on the greenback's recent gains against the European single currency.
The dollar reversed
after reaching a 3 1/2-month high against Japan's yen overnight in the
wake of tough inflation talk by U.S. central bank officials.
The dollar index DXY Dollar Index Future - Spot Price Last: 73.24-0.45-0.62%
12:12pm 06/11/2008
DXY 73.24, -0.45, -0.6%) , which tracks the greenback against a basket of six major currencies, fell 0.6% to 73.19. Dollar weakness typically benefits dollar-denominated commodities such as gold and crude oil.
DXY 73.24, -0.45, -0.6%) , which tracks the greenback against a basket of six major currencies, fell 0.6% to 73.19. Dollar weakness typically benefits dollar-denominated commodities such as gold and crude oil.
"Looking ahead, short-term direction is still likely to be
dollar-driven," James Moore, an analyst at TheBullionDesk.com, wrote in
a research note.
"However, with
inflation on the increase, longer-term investors should continue to
look favorably towards gold, with the metal likely to carry out further
base building ahead of $850 before rallying back towards $1000 later in
the year," Moore added.
As oil prices continue to rise, gold becomes more appealing as a hedge against oil-generated inflation.
Crude-oil futures rallied $4.64 at $135.96 a barrel after the Energy Department reported that U.S. crude supplies dropped by 4.6 million barrels to 302.2 million for the week ended June 6.
Also on the Nymex, July silver rose 29 cents at $16.93 an ounce and
July platinum gained $37.40 at $2,040.30 an ounce.
September palladium gained $4.75 at $433 an ounce and July copper rose 2 cents at $3.58 a pound.
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