Gold prices eased yesterday as the dollar firmed, but analysts said investors seeking refuge from financial market turmoil should boost the precious metal over coming months.
Spot gold was at $798.30/799 a troy ounce at 1106 GMT compared with $801.10/801.80 late in New York. The precious metal touched a 28-year high of $845.40 an ounce in early November as investors, worried about the credit market freeze and financial instability, ran for cover.
“The dollar is a bit stronger,” said Philip Carlsson, global product manager at Saxo Bank. “Longer term gold is still within an uptrend, going towards $1,000. We haven’t seen the lower boundaries of the dollar yet and investors are nervous.”
A stronger United States currency makes dollar-denominated metals more expensive for holders of other currencies.
Gold is expected to trade within a narrow range around $800 an ounce, at least until the afternoon session, when a flood of data from the United States could change or reinforce sentiment. China acted to curb inflation by raising interest rates, a move that analysts said could weigh on gold prices. “Precious metals may be slightly hurt by rising interest rates in China,” said David Thurtell, metals analyst at BNP Paribas. “The hike in the deposit rate raises the opportunity cost of investing in gold.”
The metal hit a record high of $850 an ounce in January 1980. Many analysts expect that to be broken at some point over the next few months as inflation fears mount and investors fret about the stalemate in credit markets.
The dollar rose to two-month highs against the euro and a basket of major currencies yesterday, bolstered by investors repatriating funds and covering of short positions in the US currency before year-end. It also hit three-month highs versus sterling, having broken through the psychologically key $2 (Dh7.34) mark the previous day. (REUTERS)