The US currency headed for its biggest weekly loss against the euro since early December on signs of a slowing US economy. Gold, which typically trades in the opposite direction of the dollar, has gained 18% in the last year as the US currency has fallen 8.6% against the euro. „The dollar’s weakness is having a lot to do with gold prices today,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. Gold futures for April delivery gained $6.80, or 1.1%, to $653.90 an ounce on the Comex division of the New York Mercantile Exchange. Prices have risen 2.5% so far this year.
The metal extended gains after a Labor Department report showed that rising fuel, food and medical costs pushed US inflation higher than forecast last month. The 0.4% increase in the consumer price index followed a 0.2% gain in January. The February price rise was less than the 0.3% median estimate of 75 economists surveyed by Bloomberg. „Gold is still very much being seen as an inflation hedge,” said Gijsbert Groenewegen, an analyst at Gold Arrow Capital Management in New York.
A survey released today showed that US consumer confidence fell this month after a drop in global equity markets and rising defaults on supreme mortgages added to concern about the housing market. The Reuters/University of Michigan’s preliminary index of sentiment declined to 88.8 in March, the lowest level since September. „If housing prices are good, you feel far more confident,” Groenewegen said. „The defaults in mortgages can influence growth going forward, which would cause the dollar to weaken and fuel the precious metals.” The dollar dropped as low as $1.3339 per euro today, the lowest level since December 8. Silver for May delivery gained 14 cents, or 1.1%, to $13.215. Platinum and palladium futures also rose. A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date. (Bloomberg)
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