Reuters
May 12, 2009 at 6:44 AM EDT
LONDON — Gold firmed on Tuesday with a weaker dollar helping to prop up the metal’s appeal as an alternative asset, but failure to push beyond recent five-week highs limited gains.
Spot gold stood at $918.30 (U.S.) per troy ounce by 0948 GMT compared with New York’s notional close of $912.60.
Bullion found support as the U.S. currency retreated against a basket of major currencies – making dollar-priced gold cheaper for non-U.S. investors as investors latched on to the traditional dollar-gold inverse correlation.
Further residual support also came as world shares, measured by MSCI’s all-country index, levelled off after hitting a six-month high on Monday. Oil prices also moved to a six-month high.
“Certainly the equity markets did back off on Monday and profit-taking is around. I think there are concerns about how long will the ‘green shoots’ go on,” said Simon Weeks, director of precious metals sales at Scotia Mocatta in London.
“I wouldn’t expect us to break out of the broader $885-930 range at the moment – in a thin market like this when the dollar is weak then people look for gold to move higher,” he added.
Analysts have said gold prices are trapped between opposing forces as its role as a hedge against economic uncertainty vies with perceptions from some quarters that the global economic downturn might be bottoming out.
“The market has lost appetite for safe-haven buying of gold recently because of the fact that the investment market situation has stabilized … The (negative) correlation with the U.S. dollar has been stronger than before,” said Louis Lok, a dealer at Bank of China in Hong Kong.
U.S. gold futures for June delivery rose $5.60 to $919.00 after settling down $1.40 on Monday on the COMEX division of the New York Mercantile Exchange.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,104.09 tonnes as of May 11, unchanged from the previous business day.
In other precious metals, silver stood at $14.20 an ounce from $13.91 late in New York on Monday, while platinum rose to 1,125.00 from $1,114.50 and palladium was at $233.00 from $233.50. . . .
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