Gold touches record high on greenback's weakness

Gold continued its impressive rally yesterday as it rose past the $1,100 mark, making analysts believe it will rise with leaps of $10 an ounce.

Gold traders and analysts were, however, sceptical about whether bullion's prices will rise beyond $1,150 in the medium term. Gold rose to a high of $1,109.50 yesterday before sliding to $1,107.85 an ounce.

"With the rally continuing, no one is surprised about gold's rise anymore. The dollar's weakness continues to be the main reason behind bullion's rise," said Alison Burns, the Dubai-based Head of Precious Metals, Middle East and North Africa for Standard Bank. "It will be important to see whether gold's price rises beyond $1,120. We are taking a conservative view right now."

Dubai-based analysts took a conservative view on whether bullion, which has risen by $50 in the past one week, will rise through an equal amount in such a short tenure. Analysts said if investors suddenly decide to dispose gold then the price could drop to the levels of $1,080 to $1,090.

"We see strong resistances at $1,115 and $1,120. If bullion crosses the $1,120 an ounce level, then the next resistance may be at $1,150 level. But then we don't see it being crossed so easily," said Sajith Kumar PK, CEO of JRG International Brokerage DMCC. He said the impact of the decline of several equity markets has reflected into gold. "It's a dual impact of equity markets coming down and the greenback declining. That's how gold has gained trust," he added.

The yellow metal began its rally after the news of Indian Central Bank buying 200 tonnes of gold spread.

Anoop PS, Assistant Vice-President at JRG International Brokerage DMCC, said the market is rife with speculations that other central banks may do the same and this has led to a rise in prices.

Another 203 tonnes of IMF gold are currently waiting for buyers. Apprehensions that China might buy it has been allayed following comments from a former advisor to the Chinese central bank, who said Beijing would prefer to buy locally supplied gold because it was cheaper to do so. Singapore, Brazil and Korea are said to be the other prospective buyers of gold.

Meanwhile, other commodities rose along with gold. Nymex December WTI rose $1.27 to $78.70 a barrel. Base metals moved higher, led by copper, which gained 1.6 per cent to $6,600 a tonne. Aluminium rose by 0.8 per cent to $1,933 a tonne, while lead rose 2.1 per cent to $2,307 a tonne, nickel firmed 0.7 per cent at $17,525 a tonne and zinc gained 1.7 per cent to $2,218 a tonne.

 

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