Gold gained in choppy trade yesterday as an oil rally and weaker-than-expected US jobs data pushed the dollar down and lifted gold’s appeal as an alternative investment.
But analysts cautioned that gold could slide further after tumbling last week to a two-month low.
Gold rose as high as $914.40 an ounce after the data, and was last at $908.40/909.2, up from $903.40/904.20 late in New York, when it gained more than $5.
“Gold is following the foreign exchange market and we expect the market volatility to continue. On the technical side, the upside trend is broken and we may head to the downside now,” said Michael Kempinski, metals trader at Commerzbank.
“We saw heavy long liquidation last week, but the general position of the funds are still long here.”
Pradeep Unni, assistant vice-president of Vision Commodities in Dubai, told clients in a note that the US job market was seriously strained and slower growth was expected until the middle of 2008.
“What has this to offer for gold is the continuing weakness in dollar and extended gains in gold,” Unni said.
Dubai is one of the world’s leading hubs for gold traders, especially due to its proximity to the Subcontinent and the wider Middle East.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand.
The metal is also generally seen as a hedge against oil-led inflation.
On Tuesday, gold slid to a two-month low of $872.90 an ounce on fund selling before staging a modest rebound. It remained 12 per cent lower than last month’s lifetime high of $1,030.80.
Dealers said jewellers bought at the lows. US gold futures for June delivery settled up $3.60 at $913.20 an ounce. “In the coming days, gold should trade in a wide range between $850-$950 an ounce. Whether gold will test the upper end of this range will depend on it going through and holding gains above the $910-$920 level,” said Wolfgang Wrzesniok-Rossbach, head of sales at German precious metals trading group Heraeus.
Platinum rose to $2,005/2,015 from its US finish of $1,985/1,995 an ounce, when it rose more than two per cent on worries that South Africa’s state utility could not meet electricity demand from precious metals miners. “The ongoing power supply concerns impacting South African production continue to underpin prices,” Barclays Capita said in a daily market report.
Implats, the world’s second biggest platinum producer, said South Africa did not boost its power allotment to 95 per cent from 90 per cent.
Government officials said on March 6 that mines would be able to increase their power consumption to 95 per cent of normal use but the company said not all mines got the higher allotment. South Africa’s power crisis may last many years unless there is a sustained drop in electricity demand in Africa’s largest economy, state power utility Eskom said this week.
Supply worries, caused by mining disruption in main producer South Africa, sparked speculative buying and propelled the price to record high of $2,290 an ounce on March 4. (Reuters)
Experts say gold may slip further