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Gold above $946 as dollar falls
Gold hit a two-week high above $946 per ounce yesterday, extending its gains as the dollar retreated, while firmer oil prices raised its appeal as a potential inflation hedge.
- Reuters
- Published: 23:23 June 26, 2009
London: Gold hit a two-week high above $946 per ounce yesterday, extending its gains as the dollar retreated, while firmer oil prices raised its appeal as a potential inflation hedge.
Spot gold touched a high of $946.90 in London - last seen in mid-June - up from $938.55 quoted late on Thursday in New York. The metal stood at $946.65 by 1134 GMT.
Global stocks rallied while the dollar fell against a basket of currencies, bolstered by a return to risk-seeking behaviour after remarks by the US Federal Reserve convinced investors that borrowing costs would stay near zero and the debt-buyback programme would continue apace.
The weaker US unit also made dollar-denominated gold cheaper for holders of foreign currencies.
The precious metal, viewed as a potential hedge against inflation, also got a boost from steady oil prices as supply concerns held crude above $70 a barrel.
Analysts said that gold was rallying on the weaker dollar and end-of-quarter deals, despite weak fundamental demand.
"From a fundamental perspective at least, $945 is a very good position for gold to be entering the second half of the year," said Nick Moore, Head of Commodity Strategy at RBS Global Banking and Markets.
Higher base metal prices, which have soared since the start of the year, could encourage investors to switch out of their holdings in gold to take advantage of higher demand for raw materials ahead of any economic recovery, analysts said.
"I'm concerned there will be more appetite for other things, and gold could get neglected if people want equities, energy and industrial metals," said Robin Bhar, an analyst at Calyon.
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