Gold hits new high on weak dollar

Hong Kong: Gold rose above $1,120 (Dh4,110.2) an ounce to a fresh record high yesterday as the US dollar wavered near 15-month lows, while Asian shares lost ground as investors took profits after four days of gains.

Financial spreadbetters expected British and French shares to follow Asian markets lower but saw a higher opening for Germany's DAX share index US equity futures slipped 0.4 per cent.

The dollar fell to a 15-month low in early trade before recouping some losses, but was still down 0.2 per cent against a basket of major currencies by mid-afternoon.

Its weakness encouraged a further shift by investors into gold which hit a record high for a second day, rising around 0.4 per cent to $1,120.30 an ounce, while platinum rose to a record high above $1,376 an ounce.

Bullion has recorded successive record highs for six out of the past eight sessions due to persistent dollar weakness, fears of a resurgence in inflation and hopes for more central bank gold buying.

Sterling also remained under pressure after the Bank of England on Wednesday explicitly called for currency weakness to boost exports and on benign UK inflation data. Sterling was trading at $1.6569, after falling more than one per cent the previous day.

Asian shares surrendered early gains, showing some signs of fatigue as a massive rally extends into its ninth month.

The MSCI index of Asia Pacific stocks traded outside Japan was down 0.3 per cent in late trade, snapping a four-day winning streak, but has still more than doubled from March lows and is near a 15-month high hit in October.

Hong Kong stocks fell 0.9 per cent as profit taking set in. Japan's Nikkei index also gave up early gains and closed 0.7 per cent lower.

"The market lacked strength for further gains and consolidation is needed for the market to take a breather," said Ben Kwong, chief operating officer at KGI Asia in Hong Kong.

Risk appetite

Analysts however, said profit taking could be limited as investors still seem to have an appetite for risk, reflected by the flight out of the weak dollar into higher-yielding assets.

Robust economic data from China has added to expectations the world's fastest-growing major economy can lead a pick-up in global activity, while a report yesterday showed US home foreclosure filings slowed for a third straight month in October.

Australia's equity market dipped 0.2 per cent after strong employment data for October raised the likelihood of another interest rate rise next month.

That along with firmer prices for gold and other commodities propelled the high-yielding Aussie dollar to a 15-month high of $0.9370.

"One month of this data you can take with a grain of salt, but two months in a row of positive [employment] numbers is starting to look like a trend," said Rob Henderson, head of market economics at National Australia Bank.

Asian currencies are also expected to continue to face upward pressure after China signalled on Wednesday it was ready to renew yuan appreciation after an 18-month hiatus. Some analysts however, worry further regional currency appreciation could make its exports less competitive and impede econ-omic recovery.

The yuan rose slightly against the dollar yesterday in benchmark offshore one-year non-deliverable forwards.

Korean authorities were spotted intervening to curb the won which was quoted at 1,156 to the dollar, up from 1,157 late on Wednesday.

South Korea's central bank said recent economic activity showed "clear recovery" but added it would maintain policy easing for the time being and kept its benchmark interest rate unchanged at a record low two per cent.