Business | Markets
Gold rises nearly 1% on weaker dollar
Gold rose nearly one per cent on Tuesday on a weaker dollar, with investors waiting for a US interest-rate cut by the Federal Reserve to establish a clearer market direction.
- Reuters
- Published: 00:10 March 19, 2008
London: Gold rose nearly one per cent on Tuesday on a weaker dollar, with investors waiting for a US interest-rate cut by the Federal Reserve to establish a clearer market direction.
Bullion rose as high as $1,010.80 an ounce and was at $1,008.80/$1,009.00 at 1215 GMT, up from $1,001.00/$1,001.80 late in New York on Monday.
It spiked to an historic high of $1,030.80 on Monday on concerns over the US financial sector and a weak dollar before profit-taking erased most of the gains.
"The market is likely to continue to hold around yesterday's close ahead of the Fed rate meeting," said Suki Cooper, metals analyst at Barclays Capital.
"The current environment - inflation concerns, equity market movements and the general credit market concerns - is boosting prices, but the metal is primarily taking its lead from the dollar movement."
The dollar may come under pressure, further boosting gold prices, should the Fed cut rates by 100 basis points, she said.
The dollar eased back towards the previous day's record lows versus the euro on expectations of a hefty Fed rate cut that will make the currency the second lowest yielder in the G10.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
But some analysts said a cut was already priced into gold and the market would scrutinise closely the bank's statement following the decision for indications of its future path.
"If the Fed believes that in the due time economic crisis can be contained, then there could be marginal respite for dollar," said Pradeep Unni, analyst at Vision Commodities.
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