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Gold sheds 2% as dollar rises against euro
Gold shed more than two per cent yesterday as the dollar gained ground against the euro, traders said.
- Reuters
- Published: 00:31 April 24, 2008
London: Gold shed more than two per cent yesterday as the dollar gained ground against the euro, traders said.
Spot gold sank to an intraday low of $897.10 an ounce before steadying around 900.20/$901.20 by 1428 GMT, well below levels of $920.65/$922.05 seen late in New York trade on Tuesday.
People were unwinding their long positions on gold, after the metal's recent rally, said analyst Daniel Hynes of Merrill Lynch. "We've seen net long positions on the Comex decrease recently and I think we're seeing a continuation of that movement out of gold just at the moment," he said.
Gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed exchange-traded fund, fell to 623.41 tonnes on Tuesday from 641.82 tonnes the previous day.
Profit-taking
The metal hit a three-week high of $952.60 last week but attempts to stay above $950 were met by profit-taking. Dealers noted some physical demand but it was not enough to trigger another rally towards last month's record high of $1,030.80. "In the near-term, gold is likely to continue to take its lead from dollar movements," said Suki Cooper, precious metals analyst at Barclays Capital.
The euro pulled back from a record peak versus the dollar after a fall in manufacturing activity suggested that economic growth in the euro zone is starting to slow.
A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Oil eased to under $118 a barrel, but stayed on the boil due to supply disruptions in Nigeria and fears that a refinery strike in Scotland could hit production in the North Sea.
Inflation
"Higher oil prices should increase near-term inflation expectations, which might leave some room for near-term upside potential for commodities," analysts at Standard Bank said.
"However, continued fund liquidation signals that most investors remain on the sidelines because of uncertainty in financial markets. Precious metals should remain range-bound ahead of the Fed interest rate decision due next week."
The US Federal Reserve is expected to lower interest rates from the current 2.25 per cent.
A rate cut tends to lower the dollar's appeal, which in turn often lifts bullion demand.
Platinum fell two per cent to $1,975.50 on the back of the declines in gold, and was later $2,002.50/$2012.50 against $2,017.50/$2,027.50 previously.
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