Gold back above $950 on weak dollar, firm oil

Wednesday March 26 2008

By Frank Tang and Atul Prakash

NEW YORK/LONDON, March 26 (Reuters) - Gold ended higher and near a one-week high above $950 an ounce on Wednesday as a falling dollar and strong oil prices encouraged investors to shift money back into the market after last week's heavy sell-off.

However, gold could further consolidate before testing new highs after a tumultuous price drop last week had put a damper on the yellow metal's run, market watchers said.

Gold rose as high as $951.60 an ounce and was at $949.00/949.80 by New York's last quote at 2:15 p.m. EDT (1815 GMT), against $934.60/935.40 late in New York on Tuesday.

"We saw some pretty big falls last week and there has certainly been an increase in buying over the last day or so from investors who think those falls were overdone," said Daniel Hynes, metals strategist at Merrill Lynch.

Gold hit a record of $1,030.80 on March 17 before a broad sell-off in commodities dragged down prices to a one-month low of $904.65, briefly hurting investor confidence in the metal, seen as an alternative investment and a hedge against inflation.

The dollar slumped for a second straight session after an unexpected fall in U.S. durable goods orders bolstered worries about the economy's health, which could prompt further interest rate cuts.

Higher-than-expected U.S. new home sales numbers also failed to stop a slide in the dollar.

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.

Soaring energy prices boosted gold's appeal as a hedge against inflation. U.S. crude futures ended up $4.68 at $105.90 a barrel.

"We are still going to have another leg up towards $1,000, but I think it might be slower than the run up we saw the last time," said Suki Cooper, metals analyst at Barclays Capital.

In other markets, the active U.S. gold contract for April delivery on the COMEX division of the New York Mercantile Exchange settled up $14.20, or 1.5 percent, at $949.20 an ounce.


However, dealers said that gold could run into strong resistance due to chart-based weakness and lost momentum among gold bulls.

"This rally that we are seeing (now) is just a corrective rally. I think it's going to have problems between $965 to $980, and you will see professional selling coming to the market at that point of time," said Adam Hewison, president of, Annapolis, Maryland.

James Steel, metals analyst with HSBC in New York, told clients in a note that commodities prices, including gold and other precious metals, had ample opportunity to extend declines further during the recent correction because investors had reduced or eliminated their exposure to commodities.

Platinum was supported by supply fears due to the power crisis in top producer South Africa. Palladium and silver also firmed but remained below their recent highs.

Spot platinum rose 1.5 percent to $1,990/2,000 an ounce from $1,960/1,970 late in New York on Tuesday. It hit a record high of $2,290 on March 4.

South Africa's Public Enterprises Minister Alec Erwin said on Tuesday that power utility Eskom's ability to raise capital could be undermined if it was not allowed to raise tariffs.

Eskom has struggled to cope with rising demand due to years of underspending on generating capacity. The energy grid came close to collapse in January, forcing gold and platinum mines to shut down for five days and driving platinum to record peaks.

Silver rose to $18.38/18.43 from its Tuesday U.S. close of $17.78/17.83 an ounce, while palladium was up at $453/458 an ounce, versus $442/447 in the U.S. market late on Tuesday. (Editing by Christian Wiessner) (Additional reporting by Bate Felix in London)

Reuters is a registered trademark of Reuters

One thought on “Gold back above $950 on weak dollar, firm oil

  1. Dear Sir/Madam, All the comments above seemed very professional, based on those fundamental analysis of world current situations. I usually base 20% to 25% of my analysis and future price predictions on fundamental analysis, and 75% to 80% on my own trading tools and signals which I created. When my signals on future prices of gold and major currency pairs are created, I will study some further on fundamental analysis of world current situations to confirm more on my signals. I predict that before gold price can rally up to levels of 962 and 980 per ounce, gold price should go down further next week (within first week of April, 2008) to levels of 912 and 916 per ounce to complete the strong reversal (I can foresee some potential strong sell-off of professional traders in order to have hugh profit-taken target next week). In the long run, coming May, 2008 will be able to see the price of gold go down strongly under level of 900 per ounce (maybe around level of 860 to 880 per ounce). But if some big events happen in the world, then, probably, coming April, 2008 will be able to see the price of gold go down to under level of 900 very soon. If my prediction is correct, I would like to join your company to post my technical trading points for future price of gold and even major currency pairs (GBP/USD, EURO/USD, USD/JPY, GBP/JPY, etc) as a member of your company. I would like to help investors to gain profits when listening to my correct price predictions of gold and forex. Actually, I have some trading tools which can predict the near-future price of gold in the day, that is very useful for intraday trading. The traders can jump into the market price (either up or down) promptly and each time they place a BUY or a SELL order, they can win some USD/ounce very easily and quickly with high accuracy (90% accurate for gold price prediction. If traders have time and patience to monitor their computer closely, they can even win all the times easily without loss). I plan to create my own website for people/traders to join soon this year, but to do so, I need to make myself well-known to all people around the world, and the best way is to promote myself to some publicly well-known website like Yahoo. For Forex, my signal creating tools are even 95% or more than 95% accurate. I am studying to create my manual trading of forex, and based on the previous week's prices of all currency pairs, I can create the trading signals to place either BUY or SELL order of any major currency pairs for the following week. The accuracy is about 80%, and the winning trades outweigh losing trades. This trading method is very helpful to all busy traders (even they are professional or amateur traders, or even housewife who do not have much time to study market prices based on fundamental news analysis or charts, etc. At the end of the week, they just need to spend about 15 to 30 minutes to collect the prices of any currency pairs of current week to create trading signals / breakout prices of any currency pairs for the following week. Usually, just about 1 or 2 trades per each major currency pairs per 1 week). This can be considered as a truly "SET AND FORGET METHOD", no guesswork, no worry, no computer monitor, no news analysis, etc. Thanks for your giving me a chance to say something about my own prediction of gold price, and maybe forex future price in next month. Best regards, James


    Thanks for your comments and analysis. Every success in the future.


Comments are closed.