London: The price of gold eased on Wednesday as a firmer dollar halted the previous day’s rally while silver held near an 11-month peak, boosted by technical momentum and perceptions it is undervalued versus gold.
The price of silver has climbed nearly 10 per cent so far this month, helped by a break through key chart resistance at its late October high on Tuesday, and is on track for its biggest monthly rise since January last year.
The spot gold price was down 0.1 per cent at $1,248.53 (Dh4,582.11) an ounce at 0928 GMT, off a one-week high of $1,258.00 touched overnight, while US gold futures for April delivery were down $3.60 an ounce at $1,250.70.
“We are seeing a little bit of a drop today, but it shouldn’t be too excessive,” Capital Economics analyst Simona Gambarini said.
“Sentiment towards precious metals, particularly towards gold and silver, has been quite good both in the futures market and the ETF market, and that should help build a floor underneath prices,” Gambarini said.
“Fears about China sustained gold prices at the beginning of the year, but now that those have subsided, we’re seeing other factors having a major impact: rising inflation expectations in the US and possibly negative rates in Japan and the Eurozone.
Drop in oil prices
That should stimulate demand for gold.” The dollar rose 0.1 per cent against a currency basket on Wednesday, weighing on gold, while a 2 per cent drop in oil prices fed into a softer tone across commodities.
Silver bucked the trend to rise 0.1 per cent to $16.95 an ounce, having earlier hit its highest since May at $17.23.
The metal posted its biggest weekly gain in nearly a year last week and rose by another 4.4 per cent on Tuesday.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its lowest in nearly six months at 73.7.
Silver exchange-traded funds tracked by Reuters, which have seen inflows of more than 1,200 tonnes since early March, rose another 38 tonnes on Tuesday.
Strong increase
“The ETFs help explain the rally,” HSBC said in a note. “The silver ETFs are up nearly 30 million ounces this year so far, a very strong increase, which more than wipes away losses incurred in 2015.” Platinum reached a six-month peak of $1,019.90 in earlier trade and was down 0.4 per cent at $1,007.61 later, while palladium was at $580.25 an ounce, down 0.1 per cent, after hitting a one-month high of $588.05 earlier.
