Business | General
Gold rises to $980 as dollar sinks to new lows
Gold gained nearly one per cent yesterday as a struggling dollar and firm oil prices prompted investors and speculators to build fresh trading positions.
- Reuters
- Published: 00:48 March 13, 2008
London: Gold gained nearly one per cent yesterday as a struggling dollar and firm oil prices prompted investors and speculators to build fresh trading positions.
The metal rose to $980.30/$981.00 an ounce by 1408 GMT from $971.00/$971.80 late in New York on Tuesday, when it fell to a low of $964.35 on a dollar rally after global central banks announced plans to boost liquidity in financial markets.
"Clearly the dollar has been the primary driver," said Daniel Hynes, metals strategist at Merrill Lynch. "The outlook is still very positive, although we are going to continue to see little bouts of weaknesses as people take profits."
"But we are still expecting the dollar to come under increasing downward pressure and believe the $1,000-an-ounce mark will be reached pretty soon," he added.
Divergent paths
The dollar fell broadly and neared a record low against the euro as strong euro zone economic data renewed focus on the divergent paths of European and US interest rates.
The dollar had rallied sharply the previous session after the Federal Reserve said it would lend primary dealers $200 billion in Treasury securities and accept a wider array of mortgage debt as collateral to help ease tight credit markets.
A weaker dollar makes gold cheaper for holders of other currencies. The metal is also generally seen as a hedge against oil-led inflation.
"There is a lot of investor interest in gold right now and investor sentiment is the key driver for gold prices, but physical demand holds them down," said Dan Smith, metals analyst at Standard Chartered Bank. "We expect a broad sideways move in gold prices in the coming months, though long term we are still quite bullish."
Gold is still up nearly 17 per cent since the start of the year, a rally that has dimmed physical buying in key consuming centres, although this week's consolidation around $970 has stirred demand from jewellers.
In other metals, platinum fell as low as $2,003 an ounce before rising to $2,045/$2,055, against $2,050/$2,060 late in New York and a record high of $2,290 hit on March 4. The metal has risen as much as 50 per cent in 2008.
Silver rose to $20.02/$20.07 from $19.61/$19.66 an ounce in New York, while palladium was up at $490/$495 an ounce, versus $486/$491 in the US market.
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