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Gold hovers around $800 as dollar weighs
Physical demand props up prices as India steps up purchases before the onset of the annual festive season
- Reuters
- Published: 23:25 September 9, 2008
London: Gold came under pressureon Tuesday, struggling to stay above $800 an ounce level due to a strong dollar, but robust physical demand capped losses.
Platinum dropped more than four per cent on worries about demand for autocalysts due to poor car sales in key markets such as the US, Japan and China, dragging sister metal palladium down 6.5 per cent.
Gold fell by as much as one per cent to $794.00 an ounce and was at $799.80/$800.80 an ounce by 0954 GMT, down from $802.25/$803.60 an ounce late in New York on Monday.
"The dollar rose from around $1.4300 to around $1.4100 [against the euro] yesterday and is definitely not bullish for gold," said analyst Michael Widmer at Lehman Brothers.
Support
"There is some physical buying coming through and helping the prices to hold onto those levels," Widmer said.
Bullion has fallen more than 18 per cent since hitting a four-month high of $987.75 an ounce in mid-July but stabilised around $800 an ounce - still up 14 per cent from a year ago.
Gold was well below a lifetime high of $1,030.80 hit in March and within sight of a nine-month low of $773.90 struck in mid-August. Festive demand especially from main consumer India was likely to offer support at lower levels, dealers said.
"We are approaching the Indian wedding season, which is a period of strong physical demand," said John Meyer at Fairfax Investment Bank in a research note.
India is stepping up purchases during the festive season, which peaks in October with Diwali, the Hindu festival of lights. Dealers also saw purchases from jewellers in Indonesia ahead of the Eid Al Fitr holidays in October.
"Demand from our regular customers such as India, Indonesia and Thailand is still there. There's a shortage of physical bars in this region, which also helps support premiums," said a dealer in Singapore.
Investors also kept an eye on oil prices, which fell to a new five-month low.
In industry news, exports of Italian jewellery are expected to improve after an estimated 30 per cent drop in volume in the first half to post a full-year fall of about 10 per cent, a senior industry expert said on Tuesday.
Spot platinum fell almost five per cent to $1,274.00 an ounce and was last at $1,287.50/$1,307.50 from $1,337.00/$1,357.00 late in New York on Monday, when it tumbled nearly four per cent.
"Demand is very bad. Automakers are not buying," said Kazuhiko Saito of Interes Capital Management in Tokyo, adding that cash platinum may trade below $1,200 by end-September.
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