Gold buying picks up as dollar collapses to new low
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Gold rose as the dollar collapsed to an unprecedented low against the euro and as oil prices, near 100 usd a barrel, sparked inflation jitters.
Gold benefits from an ailing greenback as those trading in other stronger currencies find dollar-denominated commodities to be cheaper.
Sky high oil prices meanwhile, which have almost doubled since mid-January, stoked worries over inflation -- to which gold is bought as a hedge.
'Buying is still pretty aggressive,' said Standard Bank analyst Walter De Wet. 'The buying we saw at the beginning of November was probably more of a knee-jerk reaction to dollar weakness,' said De Wet.
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Gold surged to 845.58 usd an ounce early November, just 0.5 pct lower than its all-time record high price of 850 usd in January 1990.
At 9.44 am, spot gold was trading up at 808.35 usd per ounce against 803.25 usd in late London trade yesterday.
The US was closed for Thanksgiving yesterday.
Safe-haven buying has also helped lift gold's value. Credit-crunch jitters have hammered equity markets and gold has been bought as a hedge as it is seen as a safe store of value.
'As long as there is pressure on global financial markets, especially equity markets, gold should remain a decent asset to invest in,' said De Wet.
Some analysts, including De Wet, warned that after such dramatic price increases, short-term corrections are likely at some point.
'There is the potential for short-term price corrections, we would view these in the context of what remains a strong medium-term uptrend for gold,' said Barclays (NYSE:BCS) Capital analysts.
There is also a strong possibility trader might sell off as the end of the year approaches to book profits.
'I'm generally still bullish on gold but there is a definite possibility of a correction at the end of the year. There are some good returns (gold has risen around 30 pct since the start of this year) I would bank that,' said De Wet at Standard Bank.
Looking ahead there is no important US economic data today to impact the dollar or gold.
In other precious metals, platinum was steady at 1,468 usd per ounce from 1,468.50 usd.
Silver was up at 14.54 usd per ounce against 14.53 usd late in London yesterday, while palladium edged down to 349 usd per ounce against 349.50 usd.
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