Wednesday May 7, 03:16 PM
Metals - Gold dips as stronger dollar pressures buying
LONDON (Thomson Financial) - Gold prices dipped midafternoon as the stronger dollar reduced the precious metal's appeal as an alternative investment, and as oil prices eased from the record highs they hit yesterday.
The dollar firmed overnight after Fed rate setters expressed concern about rising inflation, fuelling expectations it will pause in its cycle of interest rate cuts, and posted further gains against the euro midmorning as the single currency wilted after weak March euro zone retail sales data.
Softer crude prices are also undermining support for the precious metal, which is often bought as a hedge against oil-led inflation.
At 2:50 p.m., spot gold was trading at $867.43 per ounce against $876.30 in late New York trade on Monday.
Record (LSE: REC.L - news) high oil prices and historic weakness in the dollar against the euro were instrumental in pushing gold to an all-time high above $1,000 an ounce in March. However, the metal's failure to build on gains despite the continuation of those trends has led some to speculate that the gold rush may be over.
Increased risk appetite among investors amid optimism the worst of the credit crunch may be over has led some to liquidate gold holdings in favour of investing in other assets, analysts say.
While the weak dollar and strong oil have lent good support to gold so far, any sign that those trends are faltering could lead to a correction, analysts said.
'With our fundamental and technical (foreign exchange) strategists negative EUR/USD and our oil strategist unenthusiastic about the prospects for further gains in crude oil, we continue to favour the downside in gold, targeting $850/oz in one month and $800/oz in three months,' said UBS (Virt-X: UBSN.VX - news) analyst John Reade.
Meanwhile, physical demand for gold is looking healthier as prices decline from the record highs of $1,032 an ounce they hit earlier this year.
Jewellery buying is also expected to benefit from Akshaya Tritiya, a festival auspicious for the buying of precious metals, which is getting underway in the world's biggest gold market, India.
Among other metals, silver eased to $16.55 an ounce from $16.80.
Metals consultancy GFMS said silver prices could approach an average $17 an ounce this year against $13.38 in 2007 as the weak dollar, inflation fears and increased investor interest in commodities fuel buying of the white metal.
Speaking as the consultancy published its 2008 World Silver Survey in conjunction with the Silver Institute, GFMS chairman Philip Klapwijk told Thomson Financial News: 'We definitely expect silver to gain on its 2007 average year-on-year.'
Investment demand has surged in recent years, the report said, adding that 'the key development changing silver's fortune has been the pronounced shift in investor behaviour.'
Elsewhere, platinum slipped to $1,946 an ounce against $1,955, while palladium was trading at $416 against $428.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
