LONDON: Gold turned lower in New York afternoon trade yesterday on profit taking after hitting a one-month high, but it was supported by the dollar, which hit another record low against the euro on problems in the US subprime mortgage market.
Spot gold hit a high of $665.90 an ounce and was quoted at $660.90/661.70, against $662.85/663.45 late in New York on Tuesday.
Most-active gold for August delivery on the Comex division of the New York Mercantile Exchange settled down $2.30 at $662.10 an ounce.
“If the concerns about the subprime and CDO market intensify as seems likely following Moody’s announcement overnight, then the dollar may fall further, lifting gold higher still,” said John Reade, head of metals strategy at UBS Investment Bank, referring to collateralised debt obligations.
“This has the potential to become a self-fulfilling phenomenon. If gold performs well as markets are weakening and the dollar is falling then investors may turn to gold again.”
The dollar sank to a record low versus the euro and a 26-year trough against sterling for the second consecutive day, undermined by problems in the US subprime mortgage market. A weaker dollar makes gold cheaper for holders of other currencies and lifts bullion demand.
On Tuesday, ratings agencies Standard & Poor’s and Moody’s roiled financial markets with their negative views on the US market for loans to borrowers with low credit standings. Moody’s cut ratings on 399 mortgage-backed securities and said it may cut ratings on further 32, affecting $5.2bn in debt.
“Gold could soon see another surge of speculative interest, should the dollar fall below key chart support,” said James Moore, precious metals analyst at TheBullionDesk.com.
Gold has rebounded around 4% since falling to its lowest level in more than three months at $638.90 on June 27, when commodities were hit by the latest wave of risk aversion in global financial markets.
Long-term sentiment remained bullish. A Reuters poll showed that average prices would jump nearly 10% this year and gain further in 2008 on a weaker dollar outlook, less aggressive sales by central banks and physical demand.
The global poll of 33 analysts and traders conducted over the past month arrived at a median price for gold of $670, up from an average of $612.10 in 2006 and about 3% higher than the figure from a poll in January.
In mining news, South African trade unions declared a dispute against the world’s biggest platinum producer, Angloplat, yesterday after it refused to increase its wage offer, union officials said.
South Africa’s Anglo Platinum Ltd, majority owned by mining giant Anglo American, accounts for around 40% of global platinum production. The wage talks cover around 39,000 workers.
Other precious metals gained, with platinum rising to $1,298/1,305 an ounce from $1,294/1,301 late in New York on Tuesday, when it hit a one-month high of $1,307.80 ounce.
Silver hit a two-week high of $12.99 ounce before easing to $12.89/12.94 an ounce, against $12.88/12.93 late in the US market. Palladium rose to $365.55/369.55 an ounce from its previous close of $364.30/368.30. – Reuters |
