Friday May 9, 10:55 AM
Metals - Gold high on record oil, softer dollar UPDATE
(Updates prices, adds details)
LONDON (Thomson Financial) - Gold rose as record oil prices stoked inflation jitters and as the dollar weakened against the euro.
Gold moves in line with high oil prices as investors hedge against inflation and counter to the dollar as it is seen as an alternative asset.
'Some weakening in the U.S. dollar and increased investment interest have been pushing up prices,' said John Meyer, Fairfax analyst.
Oil rose to a series of records highs, hitting almost $125 at one point, as peak prices attracted a rush of fund investment. The dollar meanwhile, weakened against the euro which was up as markets continued to digest yesterday's European Central Bank interest rate decision and the lack of any signal that borrowing costs in the 15-nation currency zone will fall anytime soon.
At 10:37 a.m., spot gold was trading at $888.45 per ounce against $881.10 in late New York trade on Thursday.
While prices were higher today, some analysts reckon gold might be in for some falls going ahead.
Gold is already some 15 percent lower than the record $1,032.50 it hit mid March, largely as expectations for the U.S. economy and the dollar appear to have bottomed out.
Recent dollar strength and rising expectations that the U.S. may hold off cutting interest rates further, prompted heavy selling in recent weeks.
'Gold prices are nearing the bottom of our forecast range for 2008. The healthy $130/oz price correction in the past seven weeks looked justified compared to a less-strong Euro performance since the start of the year,' said ANZ analyst Mark Pervan. 'Prices will ease back to $840/oz by September 2008, with further downward pressure on the Euro and a seasonal slowdown in oil prices dulling gold's appeal as a financial hedge.'
Among other metals, silver rose to $17.02 an ounce from $16.81.
Elsewhere, platinum rose to $2,079 an ounce against $2,019, while palladium was trading at $436 against $433.
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