Gold rises and dollar falls amid global recovery signs

Gold rises and dollar falls amid global recovery signs. (AFP)

Gold rose as the US dollar fell yesterday and prospects for a global economic recovery encouraged investors to favour riskier assets over the greenback.

Spot gold hit a three-week high at $1,127.70 and was bid at $1,125.65 an ounce at 13.07 GMT, against $1,121 late in New York on Monday.

Platinum and palladium rose to their highest in well over a year on hopes the economic recovery will lift demand and the launch of new exchange-traded products backed by the white metals in the United States.

"Gold has bounced from the lows on the back of dollar weakness we've seen in the last few days," said Standard Chartered analyst Daniel Smith.

But he was cautious on the outlook for the metal.

"Our view is that the dollar will be more rangebound than it was late last year, and that will make any upward rallies in gold difficult to sustain," he said.

The dollar slipped across the board as investors poured fresh funds into riskier assets at the start of the year, and as the market awaited US non-farm payrolls due later in the week.

Weakness in the US unit boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.

On the physical market, gold buying in India, the world's biggest bullion consumer in 2008, continued for a second day yesterday as a strong rupee made the metal cheaper for domestic traders, dealers said.

Analysts say there are signs that physical demand is returning as buyers become acclimatised to higher prices. "Reports indicate that jewellery demand is picking up at these levels," said Fairfax analyst John Meyer in a note.

New York's SPDR Gold Trust reported sales on the first trading session of 2010, and its holdings dropped nearly five tonnes on Monday.

 

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

 

Print Email
Comments

Comments